OnStar, which is owned by General Motors, wrote to customers that it would track former clients unless they notified the company they preferred not to be tracked, the New York Daily News reported Wednesday.
But the policy provoked a political backlash with Sens. Chuck Schumer, D-N.Y., Al Franken, D-Minn., and Christopher Coons, D-Del., speaking up against the policy, which would have affected 6 million subscribers.
Privacy advocates also voiced disapproval, the newspaper said.
Schumer had gone so far as to ask the Federal Trade Commission to investigate the matter.
But OnStar changed course. OnStar President Linda Marshall said, "We realize that our proposed amendments did not satisfy our subscribers."
The new policy requires customers to take the first step, notifying OnStar first that they have permission to monitor the customer.
The system can track a driver's speed and location. It can also relay information on whether or not the driver is wearing a seat belt.
In a statement, Schumer said, "This announcement puts decisions about personal privacy back where they belong, in the hands of individuals."