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?