Auto finance company scopes GPS tracking

Aim is to use GPS data to assign risk scores to auto loans

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.

"I said I had great concern and that I was not approving or blessing this program. But if the question was, 'does it violate any current consumer or credit laws I could not see that it does'," Lund said.

GPS devices are routinely used by companies to track the movement of commercial vehicles and some car rental companies have also been using them to track the whereabouts of their vehicles.

A growing number of car dealers too are believed to be using hidden GPS devices to monitor vehicles sold to people with poor credit.

The rationale is that the devices would help the dealers quickly track down and repossess their vehicles in the event that a customer defaulted on payments.

This appears to be the first time, however, that a company is exploring the use of GPS tracking in this fashion. Lund said.

If the auto financing company does move ahead with its plans to use GPS devices it is almost certainly going to face considerable opposition from privacy advocacy groups.

Many groups have been vocal in their opposition to the unchecked used of GPS devices for consumer tracking and law-enforcement purposes. Main concerns stem from what privacy advocates say is the ability of GPS devices to enable deeply intrusive monitoring of an individual's daily movements and habits.

News of the financing company's inquiry, first reported by the Bangor Daily News, comes just days after the U.S. Court of Appeals for the District of Columbia circuit rejected claims by the government that federal agents be given the authority to conduct around-the-clock, warrantless GPS tracking of suspects.

In arriving at the decision, the court ruled that gathering evidence via continuing GPS tracking without a warrant was a violation of an individual's constitutionally protected right against unreasonable search and seizure.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at  @jaivijayan or subscribe to Jaikumar's RSS feed . His e-mail address is


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