Surge pricing, litigation, and subprime loans…oh my, Uber!
Between a lawsuit over its labor practices, extremely expensive fares during Halloween, and now a controversy over its financing program, it seems like Uber can’t shift itself out of its troubled gear.
The San Francisco-based company offers a smartphone app that allows riders to call for a private ride, a service that has helped Uber gain popularity in the emerging “peer-to-peer economy.’’ But lately, it has been hard to ignore what’s been making the company unpopular in the eyes of customers, employees, and the federal government.
According to Valleywag, the ride-sharing company is urging its drivers with less-than impressive credit to sign for subprime loans.
Here’s how it works: Uber needs drivers, but not all drivers who sign up for Uber have cars. More importantly, some of these drivers don’t have good credit, either. To solve this dilemma, Uber launched a program to connect drivers with subprime lenders.
The loans that Uber is pushing on its drivers are the same type of loans that plunged the nation into the Great Recession, in case you forgot. More importantly, the word “subprime’’ does not appear anywhere in Uber’s marketing materials, as Valleywag points out.
This summer, the federal government decided to take a closer look at Uber’s financing program. Two of Uber’s financial partners, General Motors and Santander Consumer USA, were subpoenaed by the US Department of Justice. Uber has not received a subpoena itself, but apparently has yet to cease marketing these loans to its drivers.
Past customers have argued they felt victimized by the company’s “surge pricing’’ practice, especially this past Halloween. On very busy nights, when demand for rides is expected to be high, Uber charges a higher rate.
In one case, a woman was charged $362.57 after a 20-minute ride in Baltimore. She took to a crowdfunding website to foot the bill. Another customer in Denver racked up a $539 bill after a 25-minute ride.
On its blog, Uber outlines how surge pricing works, including how to get a smartphone notification when surge pricing has dropped.
According to Uber’s site:
“Surge pricing allows us to remain reliable, even on one of the busiest nights of the year. Our rates will float in real time with fluctuations in supply and demand. Increased rates incentivize more driver partners to get on the roads and ensure those who need a ride won’t be left stranded.’’
Over the years, labor attorney Shannon Liss-Riordan has sued FedEx, Starbucks, Upper Crust and even strip clubs for failing to comply with Massachusetts labor laws. Now, she has set her sights on Uber, claiming the company has been cheating its drivers out of fair wages.
Liss-Riordan claims Uber is a transportation operation that skirts the legal requirements a company would have to pay regular workers by calling itself a technology company and classifying its drivers as “contractors.’’
“It’s an old tactic of a company trying to claim it’s something new,’’ said Liss-Riordan in a phone interview. “But from a labor lawyer perspective it doesn’t seem very new at all…Uber is trying to mischaracterize what it actually is in order to avoid wage and hour laws.’’
Liss-Riordan filed her lawsuit in June. Since then, she says she has been contacted by hundreds of Uber drivers claiming unfair treatment by the company. She’s particularly troubled by a pattern of Uber making drivers pay for out-of-pocket costs.
“The most serious of damages is [Uber drivers] have to pay for expenses,’’ said Liss-Riordan. “Employees don’t typically pay for expenses to do their job. Drivers pay for gas and for maintaining their cars. Those are the expenses an employer should pay.’’
She also says drivers who rack up more than 40 hours of work per week should be making overtime.
Uber has also been drawing heat from taxi drivers around the country. Cab drivers claim the service is does not play by the same licensing and safety regulations that traditional taxi companies must comply with. In addition to cutting into to their share of business, taxi drivers say the company is putting consumers at risk.
Uber’s success has prompted several cab companies that are normally rivals to rally together in an effort to push back against Uber and other ride-sharing apps like Lyft and SideCar.
The question remains, given all these problems, why is Uber so freaking popular?