Another U.S. Auto Lender Is Being Probed Over Kill Switches

(Bloomberg) -- U.S. regulators have asked auto finance company Westlake Financial Services for information about technology like kill switches that makes it easier for lenders to repossess cars when borrowers fall behind.

The Federal Trade Commission issued a civil investigative demand to Westlake in November, seeking information on the devices, according to private bond-offering documents from this month obtained by Bloomberg. The government agency has sought information from at least two other lenders as it probes subprime collection practices, Bloomberg reported last month.

Westlake said in the document that it is cooperating with the request, which seeks information on the company's policies and procedures for communicating with consumers about the devices, how information from the devices is stored, and how the company manages complaints and disputes regarding the technology. Paul Kerwin, Westlake's chief financial officer, didn't immediately respond to a voicemail seeking comment.

The FTC's broad investigation adds to the pressure that auto-finance companies are already facing after a massive wave of lending to borrowers with blemished credit. They are under investigation by the Department of Justice and state attorneys general.

The Justice Department also initiated an investigation in October to determine whether Westlake violated the Servicemembers Civil Relief Act by allegedly repossessing active duty servicemembers' cars without court orders, the company disclosed in the documents. The U.S. sanctioned Wells Fargo & Co. over violations of the same law in September. 

U.S. authorities had already been looking into subprime lending and asset-backed securities as part of an industry probe. The Justice Department first subpoenaed Westlake about these matters in December 2014. Westlake said it is has responded to the Justice Department's requests for information and is cooperating with authorities. Department of Justice spokesman Mark Abueg declined to comment.

In the same document, Westlake said it received a subpoena from the U.S. Securities and Exchange Commission on Sept. 30, 2016, related to the company's asset-backed securities. The subpoena sought information including all offering materials and communications related to the debt since the beginning of 2014.

To contact the reporter on this story: Matt Scully in New York at mscully17@bloomberg.net.

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Dan Wilchins, Kenneth Pringle