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Ethical and Economic Evaluation of Starter Interrupt Devices
Auto lenders who provide loans to individuals with poor credit histories sometimes install a 'starter interrupt device' on the financed vehicle. This device allows the lender to remotely prevent the car from starting if a loan payment is missed. Lenders argue this technology is a necessary tool to reduce the financial risk of default, making it possible to offer loans to a wider pool of borrowers. Conversely, critics argue these devices are predatory, creating dangerous situations if a car is disabled at a critical moment and stripping borrowers of essential transportation needed for work, medical care, and family emergencies. Evaluate the use of these devices. In your evaluation, weigh the economic justification provided by lenders against the potential for significant harm and loss of autonomy for the borrower. Justify your conclusion.
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CORE Econ
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Match each stakeholder with their specific claim, experience, or legal position regarding the use of remote vehicle disabling technology in auto lending.
An auto lender operates in a jurisdiction where a loan is not legally considered in default until 30 days after a payment is missed. If this lender uses a remotely installed device to prevent a borrower's car from starting just 10 days after a missed payment, the lender's action is legally permissible.
Ethical and Economic Evaluation of Starter Interrupt Devices
Economic Rationale for Starter Interrupt Devices
Match each stakeholder involved with starter interrupt devices to their primary perspective or role in the situation.
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Based on the stated position of the device manufacturer, starter interrupt technology is designed to remotely shut down a vehicle's engine while it is in motion.
A borrower with a subprime auto loan, which includes a remotely-controlled starter interrupt device, misses a payment. The loan agreement is subject to a law stating that a loan is not legally in default until 30 days after the payment due date. Arrange the following events in the most likely chronological order from the lender's perspective.
A subprime auto lender has installed a starter interrupt device on a borrower's car. The borrower has just missed a payment. Arrange the following events in the most likely chronological order from the lender's perspective, based on the typical use of this technology.
Ethical Implications of Loan Enforcement Technology
For a lender in the subprime auto market, a starter interrupt device serves as a technological tool to mitigate the risk of contractual __________, which often occurs when a borrower lacks the funds to make payments and legal action is ineffective.
A subprime auto lender is considering a new policy to use starter interrupt devices on all loans for borrowers with low credit scores. During an internal debate, which of the following arguments presents the most significant potential long-term risk to the lender's own business profitability, despite the short-term benefit of enforcing payments?
A government regulator proposes a complete ban on the use of remote starter interrupt devices in all auto lending contracts. From an economic standpoint, what is the most probable consequence of this ban on the market for loans to borrowers with poor credit histories?
Contract Law vs. Consumer Protection