UK
UK company is to launch starter interrupt devices for use in
leased or financed cars, with the aim of cutting debtor delinquency
rates.
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Prompt Pay UK Ltd has licensed the technology for the devices
from Sekurus International LLC, the US patent holder, which has
sold over 1m units internationally. Already, Prompt Pay said,
several UK motor finance and car rental companies have trialled the
starter interrupt products, with one major sub-prime specialist set
to announce its adoption of the technology in the next few
months.
In the US, starter interrupt devices have been used for several
years, and have been found to reduce significantly levels of loan
defaults, especially among sub-prime customers. They give finance
and leasing customers a strong incentive to make payments on time,
said Prompt Pay’s development director, Patrick Murray, as without
inputting a six-digit code the device stops the car from starting.
“It puts payment at the top of the agenda,” he commented.
Murray emphasised that the devices would never stop a car that
was running when the deadline for payment passed. In addition
drivers of cars fitted with starter interrupt devices are issued
with several single-use only codes, for use in emergencies.
The device designed for use by finance companies is known as
Sekurpay OnTime, while the Sekurpay Flex system is for car rental
companies.
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By GlobalDataDelinquency cut drastically
Murray said that the technology has the potential to cut
sub-prime motor loan delinquency rates significantly. A substantial
survey by the American National Independent Automobile Dealers
Association found that installing starter interrupt devices
typically cut delinquency rates from an average of 15-30 per cent
to as little as 2.7 per cent (see graph). This means lenders can
offer lower APRs to their sub-prime customers, as they have much
greater asset security and do not need to account for a high level
of non-payment of loans.
Source: Prompt Pay
“In addition starter interruption technology allows lenders to
offer loans to a wider range of customers – people who would
otherwise never have been able to qualify for motor finance or a
car lease,” Murray said. “This opens up new markets to finance
companies.”
Another central benefit is that it drastically reduces levels of
fraud. “Fraudsters will walk away rather than take a car with the
OnTime system fitted, as they know they won’t be able to default
and get away with it,” Murray said.
The devices are, surprisingly, not viewed with hostility by
debtors – rather the opposite, Murray said, as they know that the
technology helps them to be approved for loans in the first place,
then allows finance companies to offer lower rates to higher-risk
customers. “The boxes encourage good financial behaviour, as they
let loan customers know exactly when payment is due,” Murray said.
Fresh codes are issued once payment is received, and can be sent to
mobile phones or via email, or obtained through a phone call.
On the question of whether starter interrupt devices are legal
in the UK, Murray is emphatic that there are no legal barriers to
their introduction. Prompt Pay has solicited responses from the
Department for Transport, VOSA, and Trading Standards, among
others, all of which have given the technology a green light.
Prompt Pay also consulted Stephen Finch, a highly experienced asset
finance partner at law firm Salans, who concluded that there is
nothing in UK legislation which would prevent starter interrupt
technology from being introduced.
The devices themselves are “well protected against tampering”,
Murray said. US supplier Sekurus claims that not a single device
has been removed without authorisation, and attempts to do so will
immobilise the vehicle.
Credit crunch silver lining
The recent troubles in the global finance industry “could not
have come at a better time for Prompt Pay,” Murray noted, as banks
and financial institutions steer clear of unsecured bundled assets
and income streams and scale back their underwriting
activities.
“The value of a finance company’s book with OnTime technology
will be far greater as it is much better performing,” Murray
explained. He even said that Yes Car
Credit “could have been saved” had the OnTime starter interrupt
technology been available to it.
