Cab app Uber has agreed to pay $20m to settle charges that it exaggerated how much drivers using its software can earn and downplayed the cost of financing cars through the company.
"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," said Jessica Rich, director of the Bureau of Consumer Protection at the FTC, America's trade watchdog, in a statement on Thursday.
The settlement will be used to refund affected drivers, the FTC says.
The trade watchdog has, essentially, settled a lawsuit [PDF] against Uber alleging that the company's published claims about driver earnings and vehicle lease payments were misleading.
"Uber has publicized high annual and hourly earnings to entice consumers to become Uber drivers," the FTC complaint states. "However, once drivers have begun to receive their paychecks, drivers have discovered their actual earnings were substantially less than Uber has claimed."
For about a year, between May 2014 and August 2015, Uber claimed on its website that the median income for UberX drivers in New York City was more than $90,000 annually and more than $74,000 in San Francisco.
Only 10 per cent of all Uber drivers in New York and San Francisco earned that much, the FTC says.
According to the FTC, the median income for UberX drivers was more like $61,000 annually in New York City and $53,000 in San Francisco, "when drivers' hours are standardized to a 40-hour work week."
Such standardization represents something of a problem when assessing typical earning potential, given that part of Uber's appeal to drivers is the ability to work nonstandard hours.
In her dissenting opinion arguing that the settlement is excessive given the alleged harm, FTC Commissioner Maureen K. Ohlhausen chides the agency's decision, passed by a 2-to-1 vote, to making median earnings the sole yardstick by which Uber's claims were measured.
"Indeed, for opportunities where earnings vary based on the effort of the participant, a simple median could disguise the true range of possibilities," she said in her statement, noting that the calculations exclude incentives like dynamic pricing and promotional payments.
To put that another way, those with the grit and gumption to work 160 hours per week might earn $244,000 annually, given the right stimulants.
The FTC also alleges that Uber's Vehicle Solutions Program, by which the company and auto company partners provided drivers with vehicle financing options, claimed customers could own a car for as little as $140 per week or lease a car with payments as low as $119 per week.
The regulator says that between late 2013 and April 2015, the median weekly purchase and lease payments were more than $160 and $200 respectively.
Uber, according to the FTC, claimed it "connects drivers with any kind of credit history to the best financing options available." The watchdog contends that Uber had no basis to make these claims because it didn't collect driver-specific data related to its Vehicle Solutions Program.
The FTC also claims that Uber imposed a mileage charge on drivers who elected to end their leases early, despite promising unlimited mileage.
The order resolving the FTC complaint prohibits Uber from misrepresenting drivers' earning as well as auto financing and lease terms.
Uber expressed satisfaction at seeing this episode recede into its rear view mirror. "We're pleased to have reached an agreement with the FTC," an Uber spokesperson said in an emailed statement. "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 [sic] own schedule." ®