Uber fined $20 million for lying about driver earnings, predatory financin
“Many consumers sign up to drive for Uber, but they shouldn’t be taken for a ride about their earnings potential or the cost of financing a car through Uber,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “This settlement will put millions of dollars back in Uber drivers’ pockets.”
The FTC fined the company for several specific practices related to its business. First, Uber greatly exaggerated the income its drivers were likely to earn. From at least May 2014 until August 2015, Uber’s site featured a letter from the CEO, which claimed that the median income of an UberX driver was more than $90,000 in New York City and more than $74,000 in San Francisco. These claims were widely disseminated. The FTC’s investigation found that the median income of an UberX driver in New York City was $61,000, while San Francisco drivers earned a median income of $53,000. Less than 10% of Uber drivers earn the income that the company claimed.
The FTC also found that Uber inflated its dollar-per-hour claims when advertising in specific metro areas. The advertised rates ranged from $16/hour to $29/hour and Uber claimed you could make these incomes while working part-time or flex time. The following chart shows the per-hour income rate that Uber advertised, followed by the percentage of Uber drivers that actually earned that rate in a given metro area.
Declaring that your company offers flexible and part-time hours doesn’t obviate the legal requirement to fairly represent the average income a person performing a job typically earns. The FTC found that fewer than 30% of Uber drivers earned the median rate Uber promised in 17 separate metro areas.
Next, there’s the financing issue. Uber sets specific requirements for the make and model year of a driver’s vehicle, though these vary by state and location. In order to help more prospective drivers qualify, Uber offers financing to help would-be drivers pay for vehicles and has made arrangements to provide financing via three subprime auto companies. Despite widely advertising this service as offering the best possible deal on vehicle financing. The company’s advertising represented that vehicles could be purchased with payments as low as $140 per week or leased for as little as $119 per week. Uber also represented that it “connects drivers with any kind of credit history to the best financing options available.” Finally, the company’s marketing material also claimed that drivers who leased vehicles through Uber’s program have unlimited miles and no restrictions on total distance driven.
The FTC’s investigation found that “Uber has not had any basis for making these claims. Uber has not collected, received, or monitored any Driver-specific data regarding the terms of its Vehicle Solutions Program. Indeed, when Drivers have complained to Uber about the Program, Uber repeatedly has responded with the following or a substantially similar note: Please contact your lender to discuss your payments, accruals, or amounts owed[,] as Uber does not keep track of this information. The lender indicates your weekly payment and we assist the lender in deducting that payment.”
Furthermore, despite Uber’s claims to the contrary, the financing options the company offers have been decidedly sub-par. The median weekly payment for vehicles leased under Uber’s program is well over $200, while leasers have paid an average of $160. Uber was aware of this, and its communications with the auto lenders it cooperated with reflected the fact that the terms of loans and leases were very different from what Uber promised its employees “drivers”.
Furthermore, Uber’s marketing material provided to the automotive industry acknowledged that its program was a “One size fits all” policy with an implied APR of 19.5%, significantly higher than the average lending rate automotive dealers extended to other individuals with deep subprime credit. These lies weren’t limited to borrowers with poor credit, numerous drivers who purchased vehicles through Uber got hit with interest rates that were more than double the industry average for other individuals with similar credit scores and histories.
Finally, Uber misrepresented the mileage situation. Despite telling drivers that they could drive an unlimited amount, drivers who ended their leases early, for any reason (including Uber’s own falsification of payment rates and income) were told their leases had an annual limit of 37,500 – 40,000 miles. Drivers who drove over this amount and attempted to exit the lease were obligated to pay an excess mileage charge of 20 cents per mile. The average taxi driver in New York City drives 70,000 miles per year. So if you leased a vehicle through Uber, started working full-time, and realized a year later that you’d been scammed, you’d owe $6,000 for the privilege of quitting a job you were offered in profound bad faith.
Uber has received a great deal of positive coverage from the press since it launched, but there are signs that the honeymoon is drawing to a close. The company has fought against being required to treat its drivers like employees, despite, well, treating them exactly like employees. It proudly wears its credentials as a “disruptor” of the traditional transportation market, but let’s be honest for a moment — the only reason Uber still exists is because it’s backed by Silicon Valley venture capitalists with extremely deep pockets. The company isn’t “disrupting” transportation with a more-efficient product; it’s merely enjoying billions of dollars in subsidies. Its low prices are a reflection of that, not a paean to the amazing capability of an app to reinvent on-call transportation.
For all Uber’s claims about loving its drivers, it didn’t love them enough to be remotely honest with them, to seek out good financing offers on their behalf, or to protect their rights when it negotiated lease contracts. Meanwhile, it’s working on a self-driving car fleet it hopes will kill any need for human drivers at all. The $20 million fine the FTC collected will be used to reimburse drivers who were defrauded by their employer.