NYC To Probe Leases That Uber Drivers Say Cost Them Thousands

NEW YORK — New York City's taxi regulators plan to investigate leases for cars used by ride-hailing companies such as Uber and Lyft following drivers' complaints about their high costs.

App-based drivers say the city's freeze on most new for-hire vehicles has forced them to rent licensed cars at steep weekly rates instead of using their own at a more modest cost.

Now that the cap on new cars will be extended, the Taxi and Limousine Commission will examine the terms and conditions of those leases to see whether large companies are fleecing drivers, Acting TLC Commissioner Bill Heinzen said Wednesday. The commission will also probe concerns about the policy preventing drivers from owning their own vehicles, he said.

"Before we regulate, we really want to understand, are these leases unfavorable to drivers, and are they charging higher and higher prices?" Heinzen told reporters.

To help develop that understanding, the TLC will ask the city's large leasing companies for copies of their form leases, details about other terms and conditions and information about how much they have historically charged, Heinzen said.

One solution that has been floated is a cap on how much companies can charge to lease their cars, similar to an existing limit for medallion taxi leases, he said.

Drivers and ride-hailing companies have shared concerns about the city's landmark vehicle freeze — now nearing the end of its first year — concentrating power in the hands of fleet owners while effectively barring new drivers from using their own cars.

Both Uber and the Independent Drivers Guild, a labor group for app-based drivers, argue that the vehicle freeze has created a shift toward leasing that costs workers thousands of dollars a year. Uber has pointed to a January report to the TLC that shows leasing a sedan with commercial insurance costs $388 a week on average, while owning one costs about $241 a week.

"The vehicle cap is blocking thousands of Lyft and Uber drivers like me from licensing our own vehicles and it leaves us stuck paying thousands of dollars more each year to rent cars," Tina Raveneau, a guild member who drives for Uber and Lyft, said in a statement Tuesday.

Chanel Elliott of the Lower East Side started driving with Uber just before the cap was implemented last August so she could have a flexible schedule to care for her two daughters. The freeze prevented her from licensing her personal car, she said, so she pays $425 a week to rent the Nissan Sentra she uses on the job.

That means Elliott has to shell out $22,000 in rental payments annually — an amount that could pay off her student debt twice over — while using her own vehicle would only cost about $400 a month, she said.

"If I didn’t pay that stupid overhead, I would either open up a business, pay off my student loans, probably do something with the kids in our community," said Elliott, 33. "There's so many other things that I could be doing with that money as opposed to giving it to somebody who’s already a millionaire."

Brary Guerrero of Richmond Hill, Queens shared a car with his father during his initial stint as an Uber driver that started 2015. His dad turned in the TLC plates for that vehicle two years ago, so Guerrero had to rent a car when he got his taxi license back in May, he said.

The 27-year-old said he spends $375 a week renting the Toyota Camry he drives for Uber, a number that equals about a third of the $1,100 he earns in a typical week behind the wheel. By contrast, financing and insurance for his personal car only costs $715 a month, he said — about half the cost of renting.

"They’re giving companies power over the drivers to do whatever they want," said Guerrero, who works a second job in sales to help make ends meet. "... How much you wanna bet that the prices will go up on the cars if they put a cap indefinitely?"

The freeze on new cars has sparked some concerns about replicating the city's taxi medallion system, which has been plagued with predatory lending practices, towering debts for drivers and several suicides.

But Heinzen said the app-based sector lacks the scarcity that characterizes the yellow cab industry despite efforts by ride-hailing companies to convince drivers otherwise.

There are just about 13,500 taxi medallions but 120,000 for-hire vehicle licenses, 85,000 of which are linked to the app companies, Heinzen said. And about a quarter of the holders of the for-hire licenses are not renewing them even as the number of trips taken in the cars has increased, he said.

"Some of the drivers have been influenced by the app companies and scared into thinking the there’s this scarcity of licenses," Heinzen said. "And this is what the app companies do. ... They sell fear, they sell scarcity."

But Uber argues that most of the licensees getting out of the game are small-time owners, meaning the big fleet companies will hold more of the cards as time goes on.

"More than 1,000 vehicles leave the industry every month, but fleet owners rarely exit the industry, so as the number of people looking to rent increases it’s the fleet owners who will benefit at the expense of drivers," Uber spokesperson Harry Hartfield said in an email. "And the TLC has not studied what the long-term impact will be on drivers who rent."