By J. Coyden Palmer, Chicago Crusader
Uber, the popular ride-sharing service, was hit with a huge fine last week by the Federal Trade Commission for lying to potential drivers about how much money they can make, and how affordable its vehicle financing plans were. FTC officials and Uber negotiated the settlement.
Last year, local Alderman Anthony Beale (9th) held hearings into the business practices of the popular company, which is hurting the taxi industry nationwide, according to the alderman. “I’ve had concerns about this company for a while because they were unwilling to release their data to us,” Beale told the Chicago Crusader at the beginning of January. “My main concern was safety. I want people to know who they are getting into a vehicle with, and if the vehicle is safe and if the person is who they say they are. My proposed ordinance would have made all ride-sharing drivers go through the same procedures as taxi and other livery drivers.”
But those who use the service, whether to make a living or for affordable transportation, say that without the service of Uber and its rival company Lyft, many people, especially those who live in poorer areas, would be left out in the cold. Customers and drivers say the ride-sharing industry exists because traditional cab companies often ignored them, showed up in an untimely fashion, or had rude drivers.
However, FTC officials say the San Francisco based company, which now has a global business platform, has not been honest with the public. “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.”
Beale added he does not believe the company’s claims that their drivers serve parts of the city where hailing a cab is nearly impossible. Beale said while Uber has a lot of drivers on the South and West Sides, he believes most of those drivers make their money at the airport, downtown, or picking up users on the North Side. “I think they may pick up somebody in the hood when they are starting out their day or returning home, but not spending most of their driving hours in these depressed areas as they claim,” Beale said.
Upon hearing the FTC had levied a fine, Beale issued the following statement: “It‘s unfortunate the FTC had to levy a fine against Uber to call them out on their deceptive ride-sharing practices which we’ve called attention to in the past. I guess when a company is as interested as Uber in deploying fleets of self-driving vehicles that it wishes will eliminate any need for human drivers, this should come as no surprise. But hopefully this action will force Uber to see the error of their ways and force them to start making honest and transparent statements to its drivers about the reality of what drivers can expect to earn.”
The FTC alleges that Uber claimed on its website that UberX drivers’ annual median income was more than $90,000 in New York and over $74,000 in San Francisco. The FTC alleges, however, that drivers’ annual median income was actually $61,000 in New York and $53,000 in San Francisco. In all, less than 10 percent of all drivers in those cities earned the yearly income Uber touted.
The FTC also alleges that Uber made high hourly earnings claims in job listings, including on Craigslist, but that the typical Uber driver failed to earn those advertised hourly amounts in various cities.
In addition to imposing a $20 million judgment against Uber, the stipulated order prohibits the company from misrepresenting drivers’ earnings and auto finance and lease terms. The order also bars Uber from making false, misleading, or unsubstantiated representations about drivers’ income; programs offering or advertising vehicles or vehicle financing or leasing; and the terms and conditions of any vehicle financing or leasing.
Uber has claimed there was a discrepancy between how it and the government calculated earnings. The company also defended itself regarding its lending practices for drivers with bad credit, claiming it could get anyone a leased vehicle to drive regardless of credit history. But federal investigators say the fees for leased vehicles were expensive and Uber had no oversight over the terms of those leases, which were arranged through third-party sub prime auto companies. “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,” read a statement from Uber.
Unlike taxi drivers, who have unions, drivers for ride sharing companies are independent contractors and often have no one to turn to when they are wronged, said Jim Conigliaro, founder of the US Independent Drivers Guild, based out of New York. He said with the dynamic of the transportation industry changing because of Uber, drivers must be aware of the terms and make informed decisions. “The reality of being a ride-sharing driver is a far cry from the rosy picture these apps describe and it is encouraging to see the FTC take them to task and refund drivers,” Conigliaro said. “Drivers deserve the fair pay they were promised.”