We all know about sub-prime home loans in the USA. Now there are sub-prime car loans- Loans to lower income earners with poor credit ratings. The loans are secured by a technological innovation.
Using GPS systems to track the vehicle, lenders are now able to deactivate the vehicle remotely should payments be missed. The deactivation device is required to be installed as a term of the sub-prime car loan contract. No notice of the deactivation is required.
Richard Wolff points out that this has already led to a number of situations in the US where loan recipients have been in emergency situations and have hopped into their cars, only to find that the car will not start. In one instance a loan recipient was only three days late with the repayment.
Wolff points out that, in 2008, when banks and AIG were late with their repayments to other financial institutions, provoking the financial crisis, the government came up with billions of dollars to bail them out. Technological innovation however is a more effective means of dealing with low income earners who are late with their repayments.