Ride-sharing giant starts down financing path
Uber has begun financing vehicles to drivers, taking repayments from their weekly earning, a scheme orchestrated with Texas-based Uber partner Exeter Finance in the United States.
The financing model does not require credit history checks, only police checks to ensure they present as a sound customer. The app business has invested in a $1billion credit account witch allows its Change Leasing subsidiary to purchase and hire out assets.
Uber is also trialling another scheme called Advance Pay, which allows drivers to get a $1000 interest-free loan, again repaid via wages, in collaboration with Clearbanc, a money lending start-up business.
President of Uber India, Amit Jain, told the Financial Times they’re not focussed on turning people away because of bad credit history, preferring to get people working. However India has no centralised credit score system.
“To us, creditworthiness is not a criteria, our goal is to give out leases and give out cars to as many people as possible,” Jain said. “If someone cannot pay the monthly amount, they simply return the car.”
Uber launched the internal Xchange leasing system in the US last year with the boost of a $1bn investment from Wall Street banks and Goldman Sachs banking firm. However the schemes have come under fire from consumer rights organisations for exploiting drivers by giving them debts they cannot afford to pay.
Deputy director of of the National Employment Law Project, Rebessa Smith, believes the financing unfairly locks employees into owing their bosses.
“We see it as predatory lending, plain and simple,” Smith said. “It is a car lease that comes from your employer and makes it impossible for you to leave your job before it is paid off. Uber has shifted that cost [for equipment and tools] and risk on to drivers who are making poverty-level wages.”
Meghan Joyce, Uber’s general manager for the East Coast of the US, defends the scheme as not-for-profit finance.
“All of these programmes are designed with the driver in mind first and foremost,” she said. “They are meant to be really flexible and to create options,” indicating to the Financial Times’ Leslie Hook that drivers unhappy with the deal can return the car after 30 days.
Over 50,000 drivers in the US have taken part in the financing scheme and Uber expects another 100,000 to join by the end of 2016.