Uber’s New Loan Program Could Trap Drivers In Crushing Debt Cycles | Veena Dubal


UUnder the pretext of giving its drivers better access to the banking and financial system, Uber has quietly developed a loan program that can have the potential to trap drivers in debt cycles, making them easier for the business to exploit.

In early September, a number of Uber drivers in the United States received a notification via their Uber app informing them that the company was developing an “exciting new financial product” to help them “when needed.” “If Uber provided access to affordable loans,” a companion questionnaire asked, “how likely are you to take advantage of this product?

What Uber was testing with drivers appears to be a payday loan program in which the company will offer drivers short-term credit of up to $ 500 or more. Drivers would likely pay off those debts by driving for Uber. The program, versions of which have already been rolled out in India, Brazil and Peru, has yet to launch in the United States, and Uber has declined to discuss its details in the press. But the loans are clearly part of a larger effort by the company, through its new subsidiary Uber Money, to give drivers access to financial products like bank accounts and credit cards.

Access, however, tends to come at a price. We don’t know anything about Uber’s loan terms yet. But given the company’s business model, the extreme financial pressures it faces, and its history of exploiting workers, we should fear the possibility that its lending program will create a cruel new form of digital peonage. Peonage, which was used to replace outright slavery in the southern United States after the Civil War, is a system of economic exploitation in which workers are forced to work to pay off debts to their employers. Uber’s update on this system can be delivered via a smartphone, but as California State Assembly member Lorena Gonzalez recently tweeted, it could still be “fucking feudalism”.

Uber’s prey in the past

Aslam, a full-time Uber driver, is one of the workers who received Uber’s notification regarding the loan program. His initial response was a relief: As a new refugee in the United States, he struggled to get loans and to support his family of five he often needed more money than he did. he cannot earn it by driving 60 hours a week. A small loan effortlessly obtained through his Uber app could help him make ends meet without the shame of having to ask family and friends.

The more he thought about it, however, the more troubled Aslam was about the loan offer. He had fallen prey to Uber’s financial products in the past: After buying a car through Uber’s auto finance program, he had seen with increasing anxiety Uber’s impenetrable black box algorithms shrinking his effective hourly wage, making it almost impossible to repay his automatic loans. And he was not alone. Last year, Uber was fined $ 20 million by the Federal Trade Commission for misleading drivers about its vehicle financing programs. Like Aslam, most drivers were earning much less than the company promised, and many were receiving higher interest rates on their loans and car rentals than they should have.

The only reason Aslam still drives for Uber, despite low income, long hours, and high stress, is because he owes money for his vehicle. Each week, Aslam’s car payment is automatically deducted by Uber from its income. Sometimes late at night, when he desperately wants to stop working, he calculates how much of his income he will have left after taking that deduction into account – then forces himself to continue driving.

Uber Money says it’s driven by a “mission to give people access to the kind of financial services they’ve been excluded from,” and indeed, this payday loan program, alongside their debit cards and credit, is aimed at those, like Aslam, who are the most economically deprived of their rights. But rather than expanding wealth and opportunity, access to payday loans and credit cards often represents what sociologists have called predatory inclusion – bringing historically marginalized groups into the economic system in ways that recreate. and entrench existing inequalities.

While it is true that Uber’s loan service will be offered to people otherwise excluded from the banking system, depending on how it is structured, the program also has the potential to drag drivers into a new, highly predatory financial system. . While we don’t yet know what interest rates the company will charge, Uber’s business model gives it the incentive and the means to use the loans to trap drivers in debt and keep them behind the wheel.

Maintain coercive control

How would a potentially predatory system fit into Uber’s broader goals? Since the company went public in May, its shares have fallen sharply. Meanwhile, he continues to hemorrhage money, losing more than $ 5.2 billion in the second quarter of this year alone. In order to increase its value and eventually generate profits, the company must push drivers to earn more money by working longer and at lower cost. It would almost certainly be easier to force drivers to do so if they were in debt to Uber. Such a digital peonage could be made much more exploitable by the use of data by the company to determine the prices of journeys and the incomes of the drivers. For example, Uber could reduce the income per trip of indebted drivers so that they have to drive even more hours to pay off what they owe.

Ironically, a program that forces people to work more hours for less money could also help Uber retain drivers – something the company has struggled to do but is crucial to its long-term profitability. . If the company designs its financial offerings so that drivers have to continue working for Uber in order to pay off their Uber debts or maintain access to their Uber bank accounts, the company could lock up workers. If the only way to have a bank account is to drive for Uber, then you can just continue driving for the company even if you want to stop.

Finally, in California and a growing number of other states, a new legal test has redefined who is a legal employee and therefore entitled to basic benefits like minimum wage and overtime protections. The more Uber diversifies its revenue outside of transportation services alone – more it is an ‘operating system for your life’ and not a taxi company with an app – the more likely its employees will be seen as independent contractors, who owe none of such benefits.

At the same time, however, Uber’s payday loans could help the company maintain coercive control over its supposedly independent workforce. With data on how much drivers must earn to survive, Uber can personalize interest, calibrate exactly how long a driver must work to pay that interest, and push it to – and possibly beyond – its limits. By continuing its foray into the financial services market, Uber may have proven once again that its main claim – that it offers freedom to drivers like Aslam – is also its biggest lie.

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