Auto finance company scopes GPS tracking

Computerworld - In a development that is sure to alarm privacy advocates, a major auto finance company is quietly scoping the legality of using GPS tracking devices in vehicles it finances.

Maine's Bureau of Consumer Credit Protection recently received a query from a financing company outside the state asking whether such a move would violate state consumer credit laws, bureau superintendent William Lund said on Monday.

Lund did not disclose the name of the company. But he described it is a national firm that is probably making the same inquires in other states as well.

The intention behind using GPS devices apparently is to determine if a particular car loan contract represents a good credit risk for someone planning to buy the loan in the secondary finance market, Lund said. A secondary loan purchaser is someone who purchases a loan or set of loans from the primary lender.

A lawyer for the finance company said the GPS devices will be used to analyze the car purchaser's driving patterns to determine if it matches a baseline of expected behavior, Lund said.

"The consumer's application, would establish a 'baseline' of expected behavior, and the [risk] rating assigned to the contract would be determined by how closely the GPS tracking revealed that the consumer was fitting the pattern established by the application," Lund said.

"GPS tracking would permit an agent of the creditor to determine whether or not the consumer is traveling daily to the address identified as the location of the consumer's current employer," he said.

The data would then be used to assign a risk score to the consumer's loan contract which a secondary purchaser would use in making purchase decisions.

"If employment changed after credit was granted---for example, from an office-based job to home-based work -- the rating could decrease even though the ability to pay would not be affected," he said.

Despite the potential privacy implications, there is no Maine privacy or credit laws that prohibit this sort of GPS tracking, he said. "It seems to me that once this data is gathered and complied and stored, that it is available for uses other than the uses it was intended for," Lund said.

A big challenge will be to determine for sure if the data will be used only for the indirect purpose of assigning a risk value to a loan, or whether it will be used for other more direct purposes, as well.

Lund said the auto financing company has indicated that it will disclose to all consumers its use of GPS tracking devices on the vehicles it finances. But even if the company does include the disclosure in a financing contract, the chances of consumers actually noticing it are going to be small, he said.