Loan car shutoff wins court approval

A Michigan judge ruled in favor of megadealer Mel Farr in connection with his installing engine shutoff devices on vehicles sold to customers of his Triple MMM Financing subsidiary.

Wayne County Circuit Judge Kaye Tertzag denied an injunction request by attorneys suing over the OnTime Device, with which missed loan payments can result in electronically disabling the borrower's vehicle.

The device, primarily used with subprime loans, poses no immediate danger to the vehicles' drivers or other motorists, Judge Tertzag decided.

The judge deferred ruling on the plaintiffs' request that the suit obtain class-action status to include owners of all vehicles equipped with the device.

Mr. Farr, a former Detroit Lions running back and owner of 12 franchises in southeastern Michigan and Ohio, testified that the electronic device enables MMM Financing to furnish loans to drivers with bad credit without jeopardizing his profit potential.

Manufactured by Payment Protection Systems, a California company, the device consists of a keypad and a tiny light.

Customers who visit a payment center once a week receive a six-digit code upon payment. Punching the code on a keypad in the vehicle allows the car to be started.

If more than seven days pass without a new code, the system automatically turns to a no-start mode.

Judge Tertzag was told by two plaintiffs that their cars conked out while in traffic, but Farr attorney Kenneth Lewis said no accidents or injuries had resulted. They say the device does not disable an engine that's already running.

Nearly 1,000 vehicles have been equipped with OnTime Devices, according to Farr spokeswoman Charlene Mitchell.

The device costs $250 for first-time installation on vehicles sold to new MMM borrowers. Reactivation after each disablement costs $300.

A jury in Idaho shot down a retired Air Force general's attempt to fly out of a residual payment on a Honda leased from a Boise dealership.

Plaintiff Larry Miller Honda won a judgment of $8,431 for the disputed residual, and asked an addition $12,000 in attorney fees and court costs.

The former military officer and his wife had agreed to pay $1,800 in remaining monthly lease payments when they traded in a 1993 Accord for a 1998 model.

But they balked at paying the residual after driving off in the new car. They say the salesperson cinched the sale by promising the dealership would "take care of" the residual.

Ron Kirtland, new-car sales manager, says the couple, respected residents of Boise, apparently hoped for a sympathetic jury that would reject the salesman's version of the story.

"In fact, two of the six jurors at first held out for the couple," says dealership attorney Shelly Kazakas. "But the salesman was very convincing on the witness stand, and the couple couldn't hide that they had signed a legitimate lease document."

World Omni Financial Corp. will launch CenterOne Financial Services, a new division to provide third-party servicing for prime-customer loans and auto leases.

"The demand in the market for loan servicing is exploding," says Louis Feagles, president of Financial Services, JM Family Enterprises Inc., World Omni's parent company.

He adds, "The vast majority of mortgage and credit card business that banks do today is being outsourced to third-party servicers. Now its time for banks to outsource their auto-finance portfolios as well."

For dealer loans, CenterOne will offer system processing as well as audit, administrative, credit monitoring and information services.