Ride-sharing giant Uber Technologies has agreed to a $20 million settlement with the Federal Trade Commission to settle claims it misled prospective drivers by making bloated claims about earning potential and ran a deceptive vehicle lending and leasing program. The $20 million settlement will go toward refunding affected drivers, the FTC said in a statement on January 19.
Uber’s mobile-app-based ride-hailing service basically turns anyone who can pass a basic background test into a smartphone-summoned cabdriver. Uber drivers use their own vehicles, however, and those cars and trucks are required to meet certain standards.
Own or Lease on the Cheap
Of course, not everyone owns his or her own ride, let alone one that is clean and in decent working order, so Uber hatched the idea of working with subprime auto lenders and dealers for what it calls a Vehicle Solutions Program. The FTC’s complaint said the Uber program promised to connect car buyers or lessees with cheap loans or leases, and some 5000 drivers signed up for the program from November 2013 to April 2015.
With the program, Uber said, its drivers could own a car for as little as $20 a day or about $140 per week or lease a car for as low as $17 a day or $119 per week. The FTC said the median weekly payment wound up being more than $160 a week for loans and more than $200 per week for leases.
Uber also promised “unlimited mileage” on the vehicles, but the FTC said there was no basis for such a claim and the leases actually carried annual mileage limits of 37,500 and 40,000 miles. In addition, participants in many instances paid interest rates above industry averages, the FTC said.
A spokesperson for Uber told Car and Driver that the company advertised the loans and leases based on what the third-party companies had said would be the terms. Uber ended its relationship with those third-party companies after discrepancies became apparent, the spokesperson said. Uber has since taken the program in-house and currently advertises lease plans for up to 36 months with security deposits “as low as $250” along with unlimited mileage and free basic maintenance.
Inflated Earnings Claims, FTC Said
The FTC’s complaint also says Uber exaggerated how much money people would earn by signing up to be drivers. It says a post on the company’s website, which has since been changed, claimed that uberX drivers earned a median income of more than $90,000 per year in New York and more than $74,000 in San Francisco.
The FTC said the actual median income for uberX drivers had in fact been $29,000 lower than claimed in New York and $21,000 less in San Francisco, when hours were standardized to a 40-hour work week. What’s more, fewer than 10 percent of all drivers in New York and San Francisco made the incomes Uber cited. The FTC also said Uber inflated its drivers’ hourly earnings in job listings on Craigslist and elsewhere.
It is not immediately clear how many drivers in total have been affected or how and when they will receive payments from the settlement. There are currently about 1.5 million Uber drivers globally, including some 600,000 in the United States.
Uber’s settlement with the FTC does not mean that the company admits any wrongdoing.
“We’re pleased to have reached an agreement with the FTC,” the company said in a statement. “We’ve made many improvements to the driver experience over the last year and will continue to focus on ensuring that Uber is the best option for anyone looking to earn money on their own schedule.” This settlement follows an Uber outlay in April of $100 million to resolve employment status issues with drivers in some states.
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