Well here we go, another lesson on how exploiting the poor is the goto plan for making the big bucks in our society, only lets give it a snappy title – the new sharing economy. Let’s look at how the new sharing economy looks a bunch like the old economy.
“A livery driver for a fleet owner in Boston was looking for a way to obtain his own car and drive for Uber, the popular ride-sharing service. He heard about a vehicle financing program Uber was promoting to drivers who, like him, had a poor credit history. Roger, who asked to use only his first name for business reasons, signed a lease in September with an Uber-referred lender for a brand new Chrysler minivan.
Now less than a year later, Roger says he is on the brink of bankruptcy while facing weekly payments of $450 for his car lease plus late fees.
Uber, with a head-spinning valuation of $50 billion, has become a dominant force in the passenger transportation industry in large part by luring more drivers to its platform than anyone else. In an effort to maintain that edge and expand its pool of self-employed drivers beyond those who already own a car, the company has been steering potential drivers with bad credit to subprime lenders whose leases lock borrowers into years of weekly payments at sky-high interest rates.
On its website and in promotional emails to current drivers, Uber promotes its vehicle solutions program with pitches right out of the subprime lending playbook. “Credit challenges? No problem. Get on the road in 2 days with $0 down,” reads Uber’s driver signup page.
One of Uber’s first subprime leasing partners was Santander Consumer USA, a subsidiary of the Spanish banking giant. The lender drew the attention of federal authorities in 2014 when the Department of Justice issued subpoenas to the company as part of an investigation into the subprime auto loan market. In February Santander agreed to pay $9.35 million in a settlement with the Justice Department for illegally repossessing more than 1,000 vehicles from active military personnel.”
Predatory capitalism mixed with the predatory lending. I’m not sure there is a more vile combination – well of course there is, see 2008 et al. – available in our economy presently.
“Roger Bertling, an attorney and Harvard Law School instructor who specializes in predatory lending, says these terms are bad even compared with those generally used with subprime borrowing. “That [lease] is as bad as any I’ve seen on the predatory lending level for autos,” he says of the Santander agreement. While borrowers with poor credit always face high interest rates, Bertling cites the automatic weekly payment deductions and restrictions against personal use of the vehicle as being unique in the subprime auto loan industry.
When asked about the ride-sharing and personal use restrictions, an Uber representative responded in writing that “it was not our intention to include this clause, and we worked with the lender to remove the clause once it was discovered. Our current lending partners do not include language of this nature.”
Others question the wisdom of offering unsecured car loans to those with poor credit in the first place. “There’s a reason why someone with a credit score of 300 can’t get a loan. The likelihood of them defaulting is so high,” says John Ulzheimer, a credit expert and president of consumer education at CreditSesame.com. “You could easily come up with scenarios where it’s a disaster waiting to happen.”
There’s a big incentive, however, for lenders to make these high risk loans. In a scenario reminiscent of the mortgage crisis that led to the Great Recession, there’s a big market on Wall Street for bundled subprime auto loans. In September 2013 a Santander bond sale of securitized subprime auto loans fetched $1.35 billion. A similar offering by the company last month brought in $712 million from investors.”
Ah, well if there is money to be made off the backs of the poor, desperate, and needy in our societies then why the hell not?
4 comments
June 7, 2016 at 6:19 am
Bill Malcolm
Uber is just another example of a company set up to remove cash from local markets, and send the profits back to home base. The driver gets his 60% or whatever of the fare, has to beg for a 5 star rating to keep his job, and the loot left over goes into Uber coffers somewhere else, instead of buying local goods and services..
Uber makes enough money to take recalcitrant cities to court, and ridicules anyone who disagrees with it as being techno-Luddites, while head-nodding millenials agree.
And the march to abject poverty everywhere continues. The poor getting sucked into bad car loans by Uber is just another manifestation of the old saw: it’s expensive to be poor. And completely disheartening, but those elites could care less. First they offshored jobs and broke the middle class, then started to bring in temporary foreign workers, now it’s time to ruin everyone else bar the professionals. And AI programs/apps will soon target them as well.
Aren’t things just wonderful?
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June 7, 2016 at 7:48 am
robert browning
Yes Bill M. things are good for the privileged few and at an ever accelerating rate since the Ray-gun era in the 80s in the U.S. The Cheney/ Bush boys made it easier for health care creditors to seize your ass(ets) when you can’t pay for a $ 5,000. tooth ache.
People live on hope so its easy to see how they are duped. Maybe a consumer advocate type third party should oversee loans in some way and/ or give comprehension tests to borrowers. Sadly, never fear for the Santanares et all since people’s tax money will bail them out next time too.
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June 7, 2016 at 8:36 am
The Intransigent One
Just waiting for Vern to show up and say it’s the drivers’ fault for making bad economic decisions.
Because you know, they have all the information they need to make a good decision and it’s just their unwillingness to think or to work hard or something, that makes them go for this kind of thing.
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June 8, 2016 at 5:47 pm
VR Kaine
“Just waiting for Vern to show up and say it’s the drivers’ fault for making bad economic decisions.”
Yeah, heaven forbid someone enter the conversation here and pee in the pool of perpetual victimhood that you all love to swim in. :)
Kidding aside, though, I split my argument here along four positions:
1) People aren’t forced to sign up for Uber, and nobody pitches or should expect it to be a full-time, life-long career. Anyone trying to pretend like it is, or is trying to compare it to an employee position is a complete tool.
Also, it’s a relatively new entry into a new market that is not only emergent, but disruptive, so anyone doing the “here’s how hard done by and how much of a victim I am” with Uber can go find a safe room on a campus somewhere and cry there. The entire industry is a risk – what do you think the job is going to be? Secured??
2) Poor credit? Then you get high rates. Simple as that. I think the second tier rates and credit card rates are way too high, but guess what? Your politicians as well as mine get lobbied by the financial industry and consequently get protected to charge those high rates and you give those politicians a free pass, so blame yourselves and your own ignorance as much as you want to blame the lenders.
And as for the Uber drivers, if they don’t like the rates and can’t get a car loan, then they can catch a bus and/or walk their ass over to McDonald’s and apply there where they don’t have to drive anything. Or, why don’t they just sign up to be a cab driver where they can rent a car for less?
3) I actually agree that the lender is exploiting the situation, and apparently trying to sneak small print into the deal that royally eff’s anyone. $450/week is ridiculous, and even though anyone who signs it is an idiot, the company trying to push it deserves to starve and go under. It’s a unique case, though – Toyota has leasing for Uber which is much better, and once more jump on the loan program then the deals – thanks to competition – will naturally get better.
“Because you know, they have all the information they need to make a good decision and it’s just their unwillingness to think or to work hard or something, that makes them go for this kind of thing.”
That’s right, IO, they do. For once on something concerning business, you’re bang on. :)
People w/ legitimate complaints about a business model are one thing, people trying to act like they are victims when they either a) didn’t investigate their options, b) didn’t read what they signed, or c) wanted to act like an employee and like Uber owes them a job or owes them an automatic low-rate car loan because of the shitty credit is another. Your crowd attracts losers, though, so I can see why you’d immediately rush to these losers’ sides or vice versa.
4) My fourth position may surprise you: I think Uber drivers should form an association or (possibly) unionize here. I discourage the latter for many reasons, but I would easily agree here with the need for collective bargaining – even if only to a degree. As it stands, I believe Uber can quickly and without warning drop their rates and because there’s only (basically) Lyft to compete with, I don’t think there is enough competition to push for better behavior. I also don’t think typical insurance covers for injury leading to loss of income, which either a union or association could deal with.
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