Military Members Who Get Vehicle Repossessed by Starter Interrupters Have Protections
A starter interrupter allows a creditor to disable the engine’s starter motor remotely, preventing anyone from driving the car. Starter interrupters can either be manually triggered once a borrower falls behind on his or her loan payments, or they can be activated through a program that tracks the borrower’s payments and automatically disables the car if the borrower fails to make a scheduled payment. Creditors often provide borrowers with emergency codes that bypass the starter interrupter if the vehicle has been disabled, but some consumers have complained that these codes can expire or simply do not work.
Usually, when a borrower defaults on their auto loan payments, the creditor will initiate the process to repossess the vehicle under the terms of the auto loan or retail installment sales contract.
If a borrower makes a payment prior to entering active duty, Section 532 of the Servicemember’s Civil Relief Act (SCRA) bars a creditor from terminating an installment contract for purchase or lease or repossessing an automobile while the borrower is on active duty without first obtaining a court order. Alleged violations of Section 532 can be extremely costly for creditors. In a recent SCRA settlement with the U.S. Department of Justice, one financial institution was required to compensate borrowers who had a vehicle allegedly repossessed in contravention of Section 532 by paying (1) a base amount of $10,000; (2) any lost equity in the repossessed vehicle; and, (3) any interest accrued on the lost equity. In settlements like these, DOJ and other federal regulators require borrower remediation even if the creditor was unaware that the borrower was on active duty.
Given the ease of remotely activating a starter interrupter on a borrower’s car, the significant number of service members who take out subprime auto loans, and the strong protections of the SCRA enforcement, service members should not be silent when and if creditors disable their vehicles!