Rideshare Company May Provide Payday Loan Alternative to Drivers
By Lindsay Frankel
A major rideshare firm recently announced to some drivers via an in-app message that it would develop a “new financial product” that would assist its drivers in getting out of a financial bind.
Recipients of the message were asked to answer four survey questions, including:
- “Have you taken out a small loan (of a dollar amount below 1,000 USD) in the past 3 years?”
- “If [our rideshare firm] provided loans, what amount are you most likely to request?”
This won’t be the firm’s first foray into the financial services industry. The company currently issues a co-branded Visa credit card for customers and assists its drivers in leasing vehicles with third-party partnerships. And in 2016, the rideshare business introduced a cash advance program with zero interest.
But the firm made no mention of the interest rates associated with the new product, causing concern among some politicians and drivers that it might resemble a payday loan with predatory fees. For already cash-strapped drivers, that could be extremely damaging.
Then again, drivers with bad credit or who can’t access low-interest loans through a bank or credit union would most likely get a worse deal from a payday lender. That’s especially true in states that do little to regulate the industry. Payday loans in Texas, for example, carry an average APR of 454 percent, according to the most recent data from Pew Charitable Trusts.
It’s becoming more common for employers to offer payday loan alternatives, reports The Wall Street Journal. That includes major companies and even some cities. These cash advances and loans have interest rates ranging from six to 36 percent, a far cry from the triple-digit interest rates associated with payday loans.
California Assemblywoman Lorena Gonzalez, who introduced the California bill that would reclassify certain types of contract workers as employees, told Recode: “I think anytime an employer, especially one that already skirts labor law, offers their employees loans, we are wading into very dangerous and oppressive territory.”
Since the firm declined to comment on the new product, there’s no telling if it will actually come to fruition or what fees drivers would incur from using it. But consumer advocates are shining a spotlight on the rideshare company with regards to fair treatment for drivers.