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Are Disclosure Agreements Necessary for GPS Tracking Devices?


Why should a lienholder advise a debtor that a GPS device has been installed on a vehicle being sold, and that it can be used to locate the debtor? 

Michael W. Dunagan
TIADA General Counsel

Why should a lienholder advise a debtor that a GPS device has been installed on a vehicle being sold, and that it can be used to locate the debtor?  

Here are some key reasons: 
  • A provision of Texas law makes the placement of a “homing” device on vehicles without the vehicle owner's permission a criminal offense (Sec. 16.06, Texas Penal Code).  An argument could be made that a lienholder is an “owner,” but that argument isn't consistent with Title Act definitions and references on Texas vehicle titles.  While we haven't seen any prosecutions of lienholders under this law, its mere existence is enough to make non-disclosure of GPS usage a risky enterprise.
  • Also, the Office of Consumer Credit Commissioner has taken the position that holders of seller-finance licenses must obtain signed disclosure/authorization forms when GPS-based devices are used.           
Some car creditors have been tempted, in an effort to offset the cost of GPS devices, to add the cost of electronic collection and repossession devices in retail installment contracts as an “other charge.”  The OCCC has warned that this is not a proper charge, and has ordered car creditors who added such a charge to contracts to refund the charges with interest.

The infamous Herbie's case, brought by the federal Consumer Financial Protection Bureau against a Colorado buy-here-pay-here dealer, involved, among other things, a charge on installment contracts attempting to pass through GPS costs to consumers.  The CFPB found that practice to involve several violations of Federal Truth in Lending.

Similarly, the Comptroller of Public Accounts has ruled that GPS devices are for the sole use and benefit of the lienholder, and are thus taxable to the lienholder.  Assessments with penalties have been made against dealers who haven't paid sales taxes on GPS devices and airtime charges.
 

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