Uber Is Reportedly Pushing Its Drivers To Sign Up For 'Subprime' Auto Loans
When people sign up to drive for Uber, they sometimes don't have their own car or a car nice enough to drive by Uber's standards. Some of these drivers don't have good credit, either.
Uber needs drivers, so in order to ensure everyone who wants to drive for the company is able to do so, Uber has a vehicle financing program that connects subprime borrowers - borrowers with poorer credit - with auto dealers, allowing drivers to buy a car using subprime loans, which aren't necessarily bad in and of themselves, but often have very high interest rates.
The drivers Valleywag spoke with say Uber is "bombarding" drivers with marketing material to push its vehicle financing program. There's no mention of subprime lending, so Uber drivers have to do their own homework to figure out the intricacies of the financing program. The emails Uber sends, Tiku reports, say that it's "easy to qualify, even with poor credit or no credit history at all."
Uber tells drivers payments get "automatically deducted" from their earnings, which sounds fine, until you consider that many of the Uber drivers Business Insider has spoken with aren't bringing home close to the $90,000 Uber has said its drivers can make.
The drivers Tiku spoke with say the vehicle financing program isn't helpful for drivers, and traps them in a cycle, working for Uber to pay for the car they signed up for under the guise of steady, gainful employment from Uber.
As Tiku reports, two partners in Uber's vehicle financing program - GM Financial and Santander Consumer - are currently being investigated. The companies have also faced scrutiny from state attorneys general and investors, upset with Santander with its misleading "auto lending business and underwriting practices." Both GM and Santander were subpoenaed in August by the Department of Justice because they're the top issuers of these loans, and not for anything to do with Uber's vehicle financing program (Uber's program started last November).
It's worth noting that these subprime loans, which often carry higher interest rates than prime loans, are the same kind that Uber encourages its drivers to sign up for. Uber itself is not involved with financing the loans, so drivers take on complete financial risk.
An Uber spokesperson provided this statement to Business Insider:
"We created Uber's Vehicle Financing Program in response to consistent feedback from potential drivers about barriers to entry in owning a car. Our innovative program - based on Uber's strong partnerships with multiple auto manufacturers and lenders - is an option for our driver partners in 23 markets around the globe. It provides drivers with discounts on cars as well as access to financing that may not otherwise be available to them. We're very proud of the fact that thousands of our driver partners have participated in the program and collectively saved millions of dollars to date"
Read through the entire Valleywag story here. It's fascinating.