Chicago Driver Calls Rideshare Service “a Payday Loan on Wheels”

Inside Subprime: May 10, 2019

By Lindsay Frankel

Drivers for ridesharing firms turned off their apps and ceased driving on Wednesday in what is being called the biggest gig worker strike in history. The strike was initially planned to take place at the Los Angeles International Airport, but drivers from other cities, including New York and Chicago, also joined the effort.

The demonstrations captured the attention of several politicians, including presidential hopefuls Bernie Sanders (D-VT) and Elizabeth Warren (D-MS). Rep. Alexandria Ocasio-Cortez (D-NY) encouraged her followers on Twitter to boycott ridesharing for the day to pay respect to the drivers.

One driver compared his rideshare firm’s now obsolete car financing program to a Chicago payday loan, saying the firm “is little more than a payday loan on wheels. They target low-income, minority, and immigrant drivers who don’t understand what they’re giving away when they sign up,” said Lenny Sanchez in a statement on why he chose to strike.

Sanchez went on to explain that in order to finance a car through his rideshare service, drivers needed to commit to a weekly payment and meet a 150-200 ride quota each week. “The problem is, to meet these quotas a driver has to work six days of 12-hour shifts to clear $600 if they’re lucky. They feel enslaved. That’s why the turnover rate for rideshare drivers is so high. Some even take their own lives,” Sanchez said.

The comparison holds some truth. The rideshare firm’s financing program was advertised as a lifeline for people with poor credit to start earning income, much like payday loans are marketed as solutions to emergency expenses for people with bad credit. The high interest rates associated with the financing program made it difficult for drivers to keep enough of their wages to earn a living.

But those interest rates were relatively low when compared to a payday loan. Payday loans in Illinois cost borrowers an average of 330 percent APR, according to data from Pew Charitable Trusts.

Sanchez’s comparison also alleges that the rideshare firm targets low-income minorities in the same way that Chicago payday loan firms push their products on financially vulnerable people. Payday lenders concentrate their storefronts in low-income areas and are more heavily used by minorities. Payday lenders also target the elderly and people with disabilities.

Just as consumer advocates and lawmakers are fighting to curb predatory payday lending, legislation has already been introduced that would help the plight of low-earning rideshare drivers. One California bill would make drivers employees instead of independent contractors, and Sens. Sanders, Cory Booker, and Kirsten Gillibrand have brought legislation that would “increase bargaining rights for employees misclassified as independent contractors.” New York was also the first city to establish a minimum wage for rideshare drivers.

While protesting rideshare drivers may not have immediately secured higher wages, the media and political attention drawn from their demonstrations gives hope for changes in compensation and other benefits that might positively impact the estimated hundreds of thousands of rideshare drivers.

Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including California, Florida, Illinois, Ohio, Texas and more.

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