Florida lawmakers could find themselves face to face with a familiar piece of legislation in the not-too-distant future -- and maybe the sooner the better.
HB 221, the ridesharing bill, which Gov. Rick Scott signed into law in April, almost certainly will need some fixing.
Generally, I agree with Sen. Bill Galvano's assessment and enthusiasm: “Florida’s future is directly tied to its ability to encourage innovation, and ridesharing services represent a groundbreaking transportation option for Florida’s residents and visitors. This legislation will boost economic opportunity for the thousands of ridesharing drivers in Florida, while prioritizing public safety.” Galvano was a co-sponsor of the bill.
As it turns out, transportation network companies -- Uber, Lyft and their competitors -- aren't doing a great job of taking care of the backbone of the business, their drivers.
Uber operates in 76 countries and more than 450 cities, including some in Florida. Sadly, too many parts of this tech-age-ride idea -- known as "gig technology" -- are crashing and burning in places that have had them around longer than Florida has. Yet, here the rules are statewide and scant, considering this is a trend with great promise but a short track record.
Uber upended the global, $100 billion taxi market, achieving a valuation of nearly $70 billion, with an app that hails a car at the touch of a button. But the company still struggles to recruit and retain the more than 1.5 million drivers worldwide who make the business possible. And you can understand why if, for example, you look at what's happened in New York.
Should Florida follow practices afoot in New York City, our citizens -- college students, seniors, middle-class Floridians who think they're going pick up a few extra bucks part-time, or a solid living full-time -- could get sucked into a black hole from which bankruptcy is the only escape.
Beware.
As the Sun Sentinel's Randy Schultz put it, "Uber is not about everybody winning. Uber is about Uber winning."
If this company is allowed to operate in Florida as it does in the Big Apple, it will partner with a handful of agencies that offer “flexible and affordable” (i.e. shady and overpriced) rentals and lease-to-own contracts to "help drivers make a clean start."
Think of these agencies as the company store.
Drivers are independent contractors at Uber. They don't work for the company per se. They have to buy or lease their own vehicles, pay for a $1 million liability insurance policy (mandated under the new law), pay for registration, upkeep on the vehicle, you name it. They have no health insurance, no pension and no vacation.
Mostly, though, the price of the lease is somewhere between exorbitant and outrageous.
Business website Quartz tells the story of New Yorker Geovanie Rosario, who signed a lease in May 2016 for a black Lincoln MKS, New York City’s standard car-service vehicle. In a week Rosario was driving. That was the beauty of the deal, he figured, it was easy.
Rosario's contract included a $3,000 service fee and weekly payments of $495 for 159 weeks, or just over three years. The dealer, Tower Auto Mall, would take the payments directly out of his Uber earnings every Monday.
Rosario quit his job to drive for Uber. In 2015 he was being paid $12.25-an-hour at Rent-a-Center, with benefits and a 401(k). He calculated the figures in Uber's ad and reckoned he could double his money by becoming a driver. He felt confident he was going to come out ahead.
But a month into his lease, Rosario fell ill with pneumonia. Said the story, "He tried to keep driving, worried his payments would pile up, but he couldn’t control his cough. With no health insurance, it was hard to get treated, and what little money he did make went straight to his lease. It was late June when Rosario felt well enough to start working full-time again. By then he was $1,800 in debt. When he tried to start up the Lincoln, its alarm sounded.
“That’s when I realized they’d turned the car off,” Rosario said. He called Tower to ask why the dealer had remotely deactivated his vehicle. “They said, ‘You have to make a payment.’”
Uber has attracted drivers like Rosario with big signup bonuses and the promise of good pay. But then its officials cut rates and increased their own commission. Their “be your own boss” ad is all-appealing, but they gloss over the fact that independent contractors don’t get benefits or a guaranteed minimum wage.
Over and over again Uber has been sued by drivers who allege they were misclassified as contractors rather than employees. It settled with the U.S. Federal Trade Commission earlier in 2017 for misleading drivers about their potential earnings. And it had to pay back tens of millions of dollars to drivers in New York City in May, after admitting that for years it shortchanged them on wages.
Now, mostly all you hear about Uber is its upheaval on top, not so much anymore about its treatment of drivers. The company lost nearly a dozen top executives so far this year, even its founder and CEO Travis Kalanick, in a wide-ranging sexual harassment scandal. That's news, but there are deeper problems at Uber, literally where the rubber meets the road.
New York rentals and leases carry weekly payments as high as $500. They require the driver to sign a “payment deduction authorization” that lets the dealer or lessor take fees directly out of their Uber earnings, effectively garnishing their wages. Leasing a car with the intention of buying it -- “lease-to-own” -- typically takes three years, over which time a driver might pay for his vehicle two to three times over.
Uber partners with auto dealers who target people with poor credit, who otherwise might not be able to buy a car or get a loan. The deal drivers get is generally very ill-advised.
Uber advertises that drivers can do the job when they feel like it, literally make their own schedule. But that's not true. They are working sometimes a daily double shift to keep up with the financial obligations of the job.
According to the Quartz story, at the time Rosario signed his lease with Tower, a 2015 Lincoln MKS was selling new for $45,292. Rosario agreed to pay nearly twice that for a car that came with 14,000 miles already on it. The weekly payments of $495, which included the cost of insurance but not repairs or maintenance, totaled $78,705 over three years. An additional $3,000 for a “non-refundable service fee” brought the total to $81,705. At the end of the term, Rosario had the option of purchasing the car for $1.
Another downer for drivers: Uber doesn't allow them to accept tips. Lyft does.
Seems to me, Florida needs to protect its citizens from practices like the ones allowed in New York that steal their dreams. Rosario’s lack of credit history put him in a category of borrowers known as “deep subprime.” If we allow this in Florida, here we go again.
Subprime auto lending is a growing problem in the U.S., not so different from the housing bubble before the 2007 crash. Over the last six years, it has become much easier to borrow money to buy a car. The result: The volume of auto loans made to “subprime” consumers with credit scores below 620 has shot up.
In the third quarter of 2016, there were $280 billion worth of subprime auto loans in the U.S., according to data from Equifax, compared to $188 billion in the third quarter of 2010. Of those loans, the share made to “deep subprime” consumers has meanwhile climbed to 32.5 percent from 5.1 percent since 2010, according to Morgan Stanley research.
If Uber drivers are independent contractors -- likely to number quickly in the tens of thousands -- each is the equivalent of a small business. Their welfare, their position in the workforce, will be important to the fiscal health of the state.
Florida rolled out the welcome mat for transportation network companies and eased their journey. Maybe that was inevitable. But they represent a service industry in its infancy, with bugs nobody has thought of yet and a blank page on which lawmakers can write anything they wish to make this new experience succeed. I have a feeling the Legislature is going back to HB 221 soon to firm up the protection of drivers as well as riders.
They can start by mandating full-disclosure on companies' websites, with a realistic and honest chart for inquiring drivers to assess their income potential.
Reach Nancy Smith at nsmith at sunshinestatenews.com or at 228-282-2423. Twitter: @NancyLBSmith
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