“The use of the devices has increased, and it worked its way up the credit chain a bit,” says Tom Hudson, a partner at Hudson Cook LLP and founder and editor-in-chief of CARLAW, a monthly review of developments in automobile finance. “Suddenly these things seem to have grabbed the attention of the media, but they have been around for many years.”
Hudson says he first heard of the devices in 1997, when they were largely used by “buy here, pay here” dealerships. Now, more subprime lending companies have taken to using them too.
Many borrowers with bad credit are required to have the starter interrupt device installed on their cars before driving off the lot. The device has helped feed into the growing subprime auto loan market, as it allows lenders to extend subprime loans with greater confidence.
Newly originated subprime auto loans, through June, were at an eight-year high $70.7 billion, according to Equifax. The Times reported that Lender Systems, a California company that makes a variety of starter interrupt devices, has seen its revenue more than double this year.