A UK company is to launch starter interrupt devices for use in leased or financed cars, with the aim of cutting debtor delinquency rates.

Prompt Pay UK Ltd has licensed the technology for the devices from Sekurus International LLC, the US patent holder, which has sold over 1m units internationally. Already, Prompt Pay said, several UK motor finance and car rental companies have trialled the starter interrupt products, with one major sub-prime specialist set to announce its adoption of the technology in the next few months.

In the US, starter interrupt devices have been used for several years, and have been found to reduce significantly levels of loan defaults, especially among sub-prime customers. They give finance and leasing customers a strong incentive to make payments on time, said Prompt Pay’s development director, Patrick Murray, as without inputting a six-digit code the device stops the car from starting. “It puts payment at the top of the agenda,” he commented.

Murray emphasised that the devices would never stop a car that was running when the deadline for payment passed. In addition drivers of cars fitted with starter interrupt devices are issued with several single-use only codes, for use in emergencies.

Delinquency cut drastically

Murray said that the technology has the potential to cut sub-prime motor loan delinquency rates significantly. A substantial survey by the American National Independent Automobile Dealers Association found that installing starter interrupt devices typically cut delinquency rates from an average of 15-30 per cent to as little as 2.7 per cent (see graph). This means lenders can offer lower APRs to their sub-prime customers, as they have much greater asset security and do not need to account for a high level of non-payment of loans.

Source: Prompt Pay

“In addition starter interruption technology allows lenders to offer loans to a wider range of customers - people who would otherwise never have been able to qualify for motor finance or a car lease,” Murray said. “This opens up new markets to finance companies.”

Another central benefit is that it drastically reduces levels of fraud. “Fraudsters will walk away rather than take a car with the SekurPay system fitted, as they know they won’t be able to default and get away with it,” Murray said.

The devices are, surprisingly, not viewed with hostility by debtors - rather the opposite, Murray said, as they know that the technology helps them to be approved for loans in the first place, then allows finance companies to offer lower rates to higher-risk customers. “The boxes encourage good financial behaviour, as they let loan customers know exactly when payment is due,” Murray said. Fresh codes are issued once payment is received, and can be sent to mobile phones or via email, or obtained through a phone call.

On the question of whether starter interrupt devices are legal in the UK, Murray is emphatic that there are no legal barriers to their introduction. Prompt Pay has solicited responses from the Department for Transport, VOSA, and Trading Standards, among others, all of which have given the technology a green light. Prompt Pay also consulted Stephen Finch, a highly experienced asset finance partner at law firm Salans, who concluded that there is nothing in UK legislation which would prevent starter interrupt technology from being introduced.

The devices themselves are “well protected against tampering”, Murray said. US supplier Sekurus claims that not a single device has been removed without authorisation, and attempts to do so will immobilise the vehicle.

Credit crunch silver lining

The recent troubles in the global finance industry “could not have come at a better time for Prompt Pay,” Murray noted, as banks and financial institutions steer clear of unsecured bundled assets and income streams and scale back their underwriting activities.

“The value of a finance company’s book with SekurPay technology will be far greater as it is much better performing,” Murray explained. He even said that Yes Car Credit “could have been saved” had the SekurPay starter interrupt technology been available to it.