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Device disables used cars when payment is not made Flashing lights warn customers when grace period is to expire

Its keypad is small and fits snugly beneath a dashboard. But simple as it looks, the system it attaches to can decide whether or not the car will go anywhere.

The On-Time Payment Protection System is designed to give used-car dealers more confidence about doing business with customers who have poor credit histories or no credit histories.

About 200,000 On Time systems are in use nationwide, said Michael Simon, president of Payment Protection Systems in California.

Each time customers make their car payments, they receive six-digit codes to punch into the keypad. Without those codes, the system can prevent the car from operating, after the driver is given a series of warning signals and a grace period expires.

The systems are frequently used by "buy here, pay here" lots that handle financing for their customers. Dealers say the systems make their customers more diligent about paying promptly, Simon said. And they say if a car needs to be repossessed, it is easier to locate, since it cannot be driven.

Empire Funding Services Corp., which is located at the Tony Soluri Used Car Outlet in Niagara Falls, has used the system for more than nine months and likes the results, said loan officer Kelly Ricotta.

"It allows us to finance more people than we normally would," she said.

The systems are in use at about a dozen car dealerships in the Buffalo Niagara region, according to a Payment Protection Systems representative.

Customers are given a grace period if they are late with a payment. Flashing lights on the keypad warn customers when the grace period is about to expire.

If the customer still hasn't paid and entered the new code by then, the car won't operate. Customers receive a temporary emergency code, in case the car won't run when they need to get somewhere quickly, such as the hospital.

When the customers make their final payment, the system is removed from the car.

Reginald Dicks has an On Time device on his 1998 Cadillac DeVille. He previously had the system on another car he bought.

Dicks said he didn't like the system at first, but has become accustomed to it. He finds it makes him disciplined about paying, and prevents him shelling out money for late fees. The system has never shut down his car. "It keeps me on time," he said.

Dicks said the system is also helping his credit rating. "This is kind of helping me with other areas of my life," he said.

The devices are also a timesaver for Ricotta, the loan officer. Before they were installed on cars, she was constantly calling or writing customers about their payments. Now she manages everything with an electronic database.

The business has 150 of the units, which cost $225 each. The expense is absorbed by the company, since the units are its property, Ricotta said.

"It is a big investment, but it's worth it," she said. The systems can be reused and are expected to last as long as 10 years, she said.

Ricotta said hardly any potential customers have walked away from deals after learning the system would be on the car. And the business' repossession rate has fallen to about 1 or 2 percent, compared with 20 percent previously, she said.

The On Time system has been around since the 1990s, said Simon, the company president. His company was making car keys designed to prevent duplication and theft. Someone suggested that the company devise technology that would make people pay on time, and the idea for the system was hatched.

Such payment systems attracted national attention a few years ago in a case involving Mel Farr, a Michigan car dealer and ex-pro football star. Six years ago, he settled a class-action lawsuit filed by some customers who claimed the devices shut down while their cars were on the freeway, putting them in possible danger.

As one result of the out-of-court settlement, a more advanced version of the system was installed on customers' cars. Simon said his systems are built with safeguards, to prevent them from shutting down on someone driving a car.

Other companies, such as Modern Payments, are also competing in the market with their own electronic payment systems for vehicles.

Some consumer advocacy groups have raised concerns about the systems.

Ed Mierzwinski of the U.S. Public Interest Research Group, said he has not researched the car-payment devices, but he said the concept behind them worries him.

"I think there's the potential for great consumer abuse, and stigma imposed on consumers who use their cars," he said.

Mierzwinski said he is also concerned about what the next generation of technology might bring.

"I think the notion of technological control on consumers in the future is one that is going to be addressed more and more," he said.

Simon said his company's technology makes cars available to people who wouldn't otherwise be able to get loans because of their credit situations. He says his company has tapped only a fraction of the potential pool of customers.

The basic On Time system, such as the type used on cars from the Niagara Falls lot, does not have tracking technology.

But Simon said his company has obtained patents to use GPS technology on systems in more expensive vehicles that would only be activated after the On Time system disables a car.


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