SAN FRANCISCO (CN) – Uber agreed to pay $20 million to settle claims by the Federal Trade Commission that it misled drivers about potential earnings.
In a federal complaint, the commission said the ride-hailing app exaggerated how much drivers can make both annually and hourly on its website and in job listings.
In Craigslist ads, for example, Uber said drivers could make up to $25 an hour. The complaint says that from at least May 2014 until August 2015, Uber’s website published a statement saying drivers earned a median income of $90,000 a year in New York and $74,000 a year in San Francisco. In August 2015, the statement was revised, adding the word “potential.”
“However, once drivers have begun to receive their paychecks, drivers have discovered their actual earnings were substantially less than Uber has claimed,” the FTC’s lawsuit says, noting that in 2013-14, the median income for a New York Uber driver was only $29,000 and $21,000 in San Francisco, and less than 10 percent of Uber drivers in both cities earned the advertised income.
The lawsuit says Uber coaxed drivers to sign up to lease a vehicle through its Vehicle Solutions Program by touting it as “low-cost.” The FTC’s complaint says Uber told drivers they would receive the “best financing options” and pay as little as $17 per day, but drivers ended up paying over $200 a week.
These payments were deducted from their weekly fares.
The leases also imposed annual mileage limits of 37,500 and 40,000, although Uber told drivers they would have unlimited miles.
“Uber has not had any basis for making these claims,” the complaint says. “Uber has not collected, received, or monitored any driver-specific data regarding the terms of its Vehicle Solutions Program. Indeed, when drivers have complained to Uber about the program, Uber repeatedly has responded with the following or a substantially similar note: ‘Please contact your lender to discuss your payments, accruals, or amounts owed as Uber does not keep track of this information. The lender indicates your weekly payment and we assist the lender in deducting that payment.’”
In an email, an Uber spokesman said the company was pleased to have settled the claims.
“We’ve made many improvements to the driver experience over the last year and will continue to focus on ensuring that Uber is the best option for anyone looking to earn money on their own schedule,” he said.
The settlement also prohibits Uber from making misleading statements about drivers’ income or the terms and conditions of vehicle leasing or financing.
Jessica Rich, director of the commission’s Bureau of Consumer Protection, said in a statement, “Many consumers sign up to drive for Uber, but they shouldn’t be taken for a ride about their earnings potential or the cost of financing a car through Uber. This settlement will put millions of dollars back in Uber drivers’ pockets.”
The commission vote to authorize the lawsuit and proposed agreement was 2-1. In her dissent, Commissioner Maureen Ohlhausen said the settlement represented only a fraction of the injuries Uber’s financing and earnings claims caused.
“While I understand that companies have many considerations when they reach a settlement, I feel it is my duty to oppose settlements detached from the consumer harm alleged. The $20 million settlement entered today far exceeds the best estimate of actual consumer harm and I cannot support it,” she said.