Auto loans to Americans with poor credit have been booming, and many finance companies, credit unions and auto dealers are using technologies to track the location of borrowers' vehicles in case they need to repossess them.
Such surveillance, lenders say, allows them to extend loans to more low-income Americans, knowing that they can easily locate the car. Lenders are also installing devices that enable them to remotely disable a car's ignition after a borrower misses a payment.
Now, federal regulators are investigating whether these devices unfairly violate a borrower's privacy.
The auto lender Credit Acceptance Corp. said this month in a securities filing that it had received a civil investigative demand from the Federal Trade Commission asking for its "policies, practices and procedures" related to so-called GPS starter interrupter devices, which are used to disable an ignition.
Industry lawyers say the action is part of a broader inquiry by the agency into tracking technologies used in the subprime auto lending market.
The regulatory scrutiny over the GPS starter interrupter devices comes as cracks are starting to appear in the auto loan market. The percentage of auto loans that were at least 90 days delinquent increased to 3.8 percent in the fourth quarter from 3.6 percent in the third quarter, according to the Federal Reserve Bank of New York
The auto finance industry says that without the devices, many low-income Americans would not be able to buy cars that they need to get to work.
But some find it unsettling that the technology gives lenders so much control over borrowers.
"They don't need to know what we are doing — when we go out to eat, when we go on vacation," said Elias Sanchez, a forklift operator in Austin, Texas. "We want our privacy." His auto dealer didn't tell him that a GPS tracking device had been installed in his 2005 Ford SUV, he said.