The subprime cars lending market by the hail-ride app company has now recently plunged America into the Great Recession in a very unscrupulous way. Instead of mortgages, this time a different issue has been raised through around auto loans, and no doubt ruthless Uber is very much part of creating the trouble to the country. Two “partners” in Uber’s vehicle financing program are under federal investigation, but Uber hasn’t slowed its aggressive marketing campaign to get drivers with bad credit to sign up for loans. When regulators started looking at subprime auto lending few months back they found that General Motors and Santander Consumer USA—both partners in Uber’s vehicle financing service—received subpoenas from the Department of Justice in August. The DOJ targeted GM Financial (the auto manufacturer’s in-house finance division) and Santander Consumer (the American auto-loan unit of a powerful Spanish banking group) because they are the top issue creators of securities around the country related to subprime auto loans, not for anything related to their role in Uber’s financing program, which only launched last November. Regulators are concerned that “hastily” packaged loans “are being included in investments sold to pension funds and insurance companies.” However, the deals that Uber sends drivers are the same kind of subprime loans that are under investigation.
They advertise in a very attractive way that pulls more jobless people towards them and get financed for owning their own cars which would again be the dreams of thousands and thousands of youngsters. When asked for a clarification for the above problems, the general motor’s officials told the press that “General Motors values its business relationship with Uber drivers who, as independent business operators, are qualified fleet purchasers. GM Financial, the captive auto finance company for GM, does not have a formal partnership with Uber and does not participate in Uber’s vehicle financing program.” However same cases are keep on getting filed and they are getting escalated to high authorities in order to take action immediately. At the end of last month, GM Financial said it also received subpoenas from state attorneys general “and other authorities.” After the DOJ subpoenas, investors filed a lawsuit against Santander for misleading them about its “auto lending business and underwriting practices.”
How Uber is related to all these?
The company’s financing program connects drivers with poor credit to auto lenders and dealers, promising better rates. Uber does not finance the loans itself. Rather, Uber introduces drivers to partners like General Motors, Toyota, “and several unnamed financial institutions” for this purpose and get the work done through them. The startup wants drivers with nicer cars, but it badly needs more drivers overall to meet demand and feed its growth spurt. Human drivers aren’t as easy to scale as servers, causing competition between rivals like Lyft and Sidecar. The company executives contacted various Uber representatives starting last week to verify the details of its program to illustrate Santander’s affiliation with Uber. In a fawning write-up about Uber’s program, Fortune tried to argue that the “predictability” of Uber itself isn’t making any money on the scheme, not yet anyway. The company sees its go-between role as a competitive advantage in its quest to grow its network rapidly in cities around the globe. “We’re helping finance the instrument of revenue generation,” says Brent Callinicos, a longtime finance executive at Microsoft and Google who is now Uber’s chief financial officer. “In that sense, we’re generating revenue from this already.”
Does a buyer hold rights to know whether the vehicle offered for purchase was formerly a ride sharing vehicle attached with any app based company like Uber?
The vehicles attached under ride sharing company do not stand to inform the buyers that the car has been used as a taxi by thousands of people when it is offered for purchase for a second-hand buyer. However cars from other rental services, taxi companies and police services has to inform the same to the buyer definitely at any cost when they are planning to sell it which if failed doing is treated as illegal and the buyer holds to file case on the seller. Companies like Uber has regulations that is in favor of the driver partners where in they don’t have to tell the dealer or the buyer that they have attached the cab with them. “Uber drivers are under no legal compulsion to volunteer that information when trading in their car,” Warren Barnard, executive director of the Used Car Dealers Association of Ontario (UCDA) said in an e-mail press release.
Sometimes it looks un-ethical to not to disclose the information to the buyer, but as there is no rules stating so, not many drivers would be sharing the information even when asked for. Few countries have a list of disclosures to be made by the dealer or owner while selling their used cars which doesn’t include Uber so far.
Under the act, Ontario’s Motor Vehicle Dealer’s Act (MVDA), dealers have to tell the buyer in the contract that if the car was used as a taxi, police or emergency vehicle or as a daily rental and hence most of the dealer will never fail to get the necessary documents from the owner to ensure that the car has been or has not been operated under any of the above mentioned services. “The Uber service is an example of the emerging sharing economy and is not specifically covered in the current motor vehicle sales regulatory framework,” said Harry Malhi, a ministry of government and consumer services spokesman. He also adds that a dealer is also obligated to disclose any facts that could be expected to influence the decision of a reasonable buyer but not this as this has very less significant impact in the decision expect the fact that most of the people will not prefer use a product that has been used by too many number of people. But a private sale doesn’t need any disclosure like that of the registered auto dealers has to do. “From a vehicle registration perspective, car owners do not have to disclose that their vehicle was used for carpooling, ride-sourcing, rental, taxi or police services at the time of sale,” said Ontario ministry of transportation (MTO) spokesman Bob Nichols in an e-mail.
Vehicle Record Package
Sellers have to also always give the buyer a Used Vehicle Information Package who’s content varies from each country to country according to the rules and regulations prevalent. In Ontario the package contains the car’s owner name and his occupation which may give the buyer an idea on how it was used but not necessarily whether the vehicle was used for taxi, Uber, rental or police services. In Canada it is the same set of rules and regulations being followed. But in Quebec the record would tell the buyer whether the vehicle was a taxi or not, atleast which is more than enough for the buyer to decide upon it. Like it happens for other taxi companies the Uber vehicles also bring down the market value of the car as well the condition of the vehicle is also brought down and so the consumer’s exposure to a claim in damages would be theoretical for now. In near future there might be a regulation where the owner has to disclose the ride sharing service to the dealer and buyer.
The same problem is there for the vehicles being used for personnel as well as commercial purposes like delivering retail products etc, which is also a service being offered by the company Uber itself in some parts of the world. They would have handled the car in a harsh manner which most of the people to do with their cars. As of now, there is no way to prove whether the car being sold was used for commercial purposes or not, unless until the owner himself comes forward and gives the confession. But in reality how many drivers would like to admit that they have delivered hundreds of products or thousands of people have travelled along in the back seat and depreciate their car value themselves which in turn might affect the resale value.
Andrew Shah is the Digital marketing Manager of Zoplay. He is a writer and coffee lover. He has is a graduate in Computer Science and Post Graduate in Entrepreneurship and leadership from Ulyanovsk State University, Russia. He is a passionate blogger & SEO Specialist. Zoplay is a Software Development company which has launched Cabily Script which is a Uber Clone with Android and iOS apps.