Fraud in the desert and the “Disabler”

Two reports in the Wall Street Journal tell the tale of how automobile ownership is hitting the skids in the U.S. in an eerie parallel to home ownership – people are walking away from what they promised to pay for and lenders are taking steps to assure they are repaid.

In Signs of Stress, Fraud on Roadside, Las Vegans are abandoning their cars in record numbers to get out from under the monthly payment – if you don’t want to take it out to the desert and torch it yourself, the going rate is only $500 for someone else to do it.

Police detective Mark Menzie drove 55 miles into the desert Sunday to inspect the charred remains of a formerly silver Ford Expedition.

Later, he sat in a kitchen on the city’s south side where a 19-year-old man confessed to torching his girlfriend’s Chrysler PT Cruiser.

At noon Monday, Mr. Menzie was picking through the smashed windshield of a 2008 Land Rover in a desert canyon. His police radio crackled as he worked; another car was spotted burning southwest of the city.

Years of no-money-down car loans followed by sinking home values and rising unemployment has made many people desperate over car payments they can no longer afford. For some, the answer is to ditch the car, report it stolen and collect the insurance money to pay it off without hurting their credit.

Well, at least their intentions are good – to preserve their credit in order to borrow another day. The fact that they are committing a crime is apparently less important.

On the bright side, this is one more growth area for our new economy – more jobs in insurance fraud investigation and vehicle storage.

Tow yards in Las Vegas are filled with the blackened hulls of Mercedes sedans and Cadillac Escalades. The wrecks were pulled from desert hills and city streets by the department’s eight-member auto-theft unit, which responds to calls around the clock. Over one weekend this month, Mr. Menzie investigated eight car fires in 36 hours.

"This is a money town," says Lt. Robert Duvall, who reorganized the auto-theft unit to include insurance arson fraud. "Where else can you lose a paycheck in a night?"

The cops hunt suspected arsonists by SUV and helicopter, trying to identify registered owners as quickly as possible. "We see people with singed eyebrows and hands," said Sgt. Will Hutchings, Mr. Menzie’s boss. "Some of them still smell like gas."

The trend began to surface in 2007 when gas prices spiked and the number of auto arson claims jumped. In 2008 claims climbed nationally by 6%, said Dick Luedke, a spokesman for State Farm Insurance. In hotspots like Indiana, Michigan and New York the numbers rose 13% to 18%.

Traditionally, such insurance fraud rarely leads to arrests, falling through the cracks between police and fire department jurisdictions. After Las Vegas became the nation’s leader in auto theft in 2006, Lt. Duvall decided to tackle the problem more aggressively.

In Late on a Car Loan? Meet the Disabler, word comes that there may be a little less work for repo men since used car dealers are installing an increasing number of devices that disable the vehicles of delinquent borrowers.

Jamie De Lisle’s Buick had been warning her for days, first with a flashing yellow light, then a flashing red light. But the 31-year-old mother of two from Collinsville, Ill., was too busy to heed the distress signals. It was only when Mrs. De Lisle began hearing an incessant beeping that she took notice: If she didn’t make her car payment that day, the vehicle wouldn’t start the next day.

The repo man has found a new hiding place — inside your car. Increasingly, used-car dealers are installing remote disabling devices that keep the cars from starting if the buyer gets too far behind on payments.

These so-called disablers, palm-sized devices that are placed under dashboards and wired into ignitions, once were limited to what industry insiders call the "buy here — pay here" segment: the kinds of small used-car lots that line state highways, strung with lights and multicolored pennants. But as the economic downturn deepens, larger, more mainstream dealerships are using the devices as a condition of financing.

Even as the recession has fueled the used-car market, it has made it harder for auto buyers to obtain credit. Eager to book sales, dealers and finance companies are expanding their own financing operations, and the use of disablers helps them prod customers to make timely payments. Satellite-based locators are often built into the remote systems, though some dealerships say they don’t make use of that capability.

Maybe they should install heat sensors in these "Disablers" so, when the car is torched out in the desert, they could immediately scramble a team to arrest the perpetrators.