The subprime lending market that plunged America into the Great Recession is back and as unscrupulous as ever. Instead of mortgages, this time a bubble has formed around auto loans, and reliably ruthless Uber is in the thick of it. Two "partners" in Uber's vehicle financing program are under federal investigation, but Uber hasn't slowed its aggressive marketing campaign to get drivers with bad credit to sign up for loans.

Regulators started looking at subprime auto lending this summer: General Motors and Santander Consumer USA—both partners in Uber's vehicle financing service—received subpoenas from the Department of Justice in August. The DOJ targeted GM Financial (the auto manufacturer's in-house finance division) and Santander Consumer (the American auto-loan unit of a powerful Spanish banking group) because they are "the top issuers" of securities related to subprime auto loans, not for anything related to their role in Uber's financing program, which only launched last November. Regulators are concerned that "hastily" packaged loans "are being included in investments sold to pension funds and insurance companies." However, the deals that Uber sends drivers are the same kind of subprime loans that are under investigation.

Update: General Motors and GM Financial, a wholly owned subsidiary of General Motors, reached out to clarify the corporation's relationship with Uber.

"General Motors values its business relationship with Uber drivers who, as independent business operators, are qualified fleet purchasers. GM Financial, the captive auto finance company for GM, does not have a formal partnership with Uber and does not participate in Uber's vehicle financing program."

And scrutiny is escalating. At the end of last month, GM Financial said it also received subpoenas from state attorneys general "and other authorities." After the DOJ subpoenas, investors filed a lawsuit against Santander for misleading them about its "auto lending business and underwriting practices."

Here's how Uber fits into all of this. The company's financing program connects drivers with poor credit to auto lenders and dealers, promising better rates. Uber does not finance the loans itself. Rather, Uber introduces drivers to partners like General Motors, Toyota, "and several unnamed financial institutions." Why? The startup wants drivers with nicer cars, but it badly needs more drivers overall to meet demand and feed its growth spurt. Human drivers aren't as easy to scale as servers, causing competition between rivals like Lyft and Sidecar. Uber dubbed its recruitment efforts "Operation Slog."

I contacted various Uber representatives starting last week to verify the details of its program. I will update this post if I hear back.

To illustrate Santander's affiliation with Uber, here's the landing page Santander designed just for Uber drivers and a job listing (since filled) on the Santander Careers website for an "UBER Loan Specialist" in Dallas, one of the cities where Uber launched its financing option.

In a fawning write-up about Uber's program, Fortune tried to argue that the "predictability" of cash flow to Uber drivers "lowers their risk to lenders." In reality, Uber's policies make the amount of money that reaches a driver's pocket increasingly unpredictable. Uber told the magazine that the program brings in revenue indirectly, by bolstering the company's rapid expansion:

Uber itself isn't making any money on the scheme, not yet anyway. The company sees its go-between role as a competitive advantage in its quest to grow its network rapidly in cities around the globe. "We're helping finance the instrument of revenue generation," says Brent Callinicos, a longtime finance executive at Microsoft and Google who is now Uber's chief financial officer. "In that sense, we're generating revenue from this already."

You won't find the word subprime anywhere in the piece. Or in this Slate article by Matt Yglesias that called Uber's "affordable car loans" one of the top ten business decisions in 2013 (emphasis mine):

... at this point the biggest barrier to the growth of Uber's ride-hiring service is on the supply side: You can't sell a ride unless you've got a driver. With the national labor market still weak and Uber's per-vehicle revenue high, demand for driving jobs is also high. But you still need a car to drive. By reaching a bit outside its core competences of software and customer service and partnering with Toyota and General Motors to get discount car loans for Uber drivers, Uber has taken a big step to solving the bottleneck. The car-loan program should also start turning Uber into a jobs machine, both on city streets and in the factories where the cars are built.

Uber drivers on the receiving end of the company's aggressive promotion don't see the word subprime either, or hear a peep about the civil investigations.

The company has been bombarding drivers in San Francisco with email offers encouraging them to sign up for Uber's vehicle financing program—including one sent days after the latest subpoena. The most recent ones, obtained by Valleywag, open with the image of a car with cash literally flying out of the backseat. Uber promises drivers that it's "Easy to qualify, even with poor credit or no credit history at all."

Some emails include screenshots of the company's vehicle financing page, which says "UBER MAKES GETTING A CAR EASY" in all caps at the top. The first bullet point underneath that says "No credit required."

The Vermont Street address in the screenshot above is the location of Uber's "decoy office" for drivers in Potrero Hill, away from its sleek new Mid-Market headquarters. The image below is the screenshot that Uber often includes in its email pitches.

In promotional materials, drivers are further enticed to take out loans with the promise that car payments "are automatically deducted" from their Uber earnings. Those automatic deductions probably sound harmless given that Uber CEO Travis Kalanick has claimedrepeatedly—that drivers in his leasing program can gross $100,000/year.

But when Kalanick launched the discounted deals last November, he told Bloomberg that loan program would help ensure that drivers spend more time working for Uber, instead of its rivals. Kalanick was still careful, of course, to call drivers "independent contractors," even with this binding tie to Uber:

"The risk of financing these guys goes way down when they're affiliated with us because they get in that car and they go to work everyday and they're grossing $100,000/year on that vehicle. So when you reduce the rates, it means a $100 less on your car payment [...] The part about being affiliated with Uber means they're doing a certain amount of volume on the Uber platform. That's the only way that the risk is reduced, so in that way they have to working with us a certain amount."

In an interview with the Wall Street Journal, Kalanick also emphasized how these leases increase the supply of drivers:

The deals with carmakers and lenders are part of a broader push to add more than 200,000 vehicles to Uber's network over the next two years, Kalanick said.

"We've got to light up a whole bunch of supply," he said. "We're literally talking about powering billions of dollars in car purchases."

A typical Uber driver takes in more than $100,000 a year in gross sales–making them less risky candidates for low lending rates. Though Uber would not specify which lenders it's partnering with or the exact terms it's offering, Kalanick said average drivers will save more than $100 a month on car payments.

This financial service for drivers, the Journal said, would help Uber compete in the midst of a driver shortage:

Uber is investing in more services for drivers–Kalanick calls them his "business partners"–to extend its lead over Lyft and Sidecar, rival ride-sharing services which have also been limited by a shortage of drivers.

(Lyft is just as hungry, if not as cunning as Uber. In May, the company convinced drivers to pay $34,000 for "tricked-out" Lyft-branded Ford Explorers in order to launch a luxury service to compete with Uber. Five months later, Lyft canceled the service, leaving drivers with a weak bailout offer: Lyft will help sell the trucks or give drivers a $10,000 bonus, subject to income tax.)

So why do drivers sign on the dotted line when the future of e-hailing apps is so volatile? Because companies make the reward sound certain. When Uber launched its program, Kalanick told the press that all drivers had to do to gross that $100,000 was to work 50 to 60 hours per week.

Uber's previous salary claims have been inaccurate. In May, the company proudly declared that the median salary for drivers was $90,000 per year—an inflated figure that was quickly debunked. Since the leasing program began, however, Uber has made earning money both more difficult and less predictable.

Last month, Uber said it would increase its commission in San Francisco, siphoning 25 percent up from drivers' paychecks, up from 20 percent or less. While Uber's take increased, the cost of rides decreased: the same month, Uber also permanently dropped the price of UberX rides by 15 percent in San Francisco. Drivers protested those changes last month outside Uber offices from here to London.

The same factors that make it hard to earn a livable wage through Uber obviously also have an impact on a driver's ability to pay off Uber's licensing deal. However, the company keeps aggressively advertising the option. In August, Uber released a promotional video, baldly targeting subprime borrowers:

"Even if you have bad credit or no credit at all, we can help you get behind the wheel in a week . . . The down payment is as little as a few weeks of earnings on Uber and you'll have access to serious savings . . . We've created a program designed for those with poor credit."

A couple minutes later, the ad cuts to an Uber driver named Adama who says: "It took me less than 6 hours to get a car. It doesn't take a day. It takes a few hours."

Adama Traore, an immigrant from Mali, is also featured in the misleading Fortune piece. The article claimed that "drivers hustling for fares" were "delighted by Uber's self-interested helpfulness."

On driver forums and in interviews with Valleywag, these independent contractors (or "business partners," depending on Kalanick's mood) sound more dubious than delighted. Even a neutral question about the economics of an Uber offer prompted someone who identified as an UberX driver in San Francisco to call it "A deal that would make a payday checkcashing enterprise blush."

I spoke with an Uber driver named Jose from the Miami region. He told Valleywag some of the "original finance programs" from Santander are "just laughably bad, and left for the desperate and/or uneducated." The program, he added, just creates "an indentured servant" for Uber.

Jose broke down the terms of a new Toyota Camry lease through Uber, as posted by another driver:

$180/week for 52 months

A $26K car for over $37K, and we haven't even included the sales tax on these payments yet.

[...]You've signed yourself up for financial responsibility for this car for over 4 years.

If I had made this decision early this year in Los Angeles, the rates were:

$1.61 flag / $.29 per minute / $1.25 per mile

If that was not tight enough, out of the blue, Uber sends out an email, and now its the current rate:

$.80 flag / $.21 per minute / $1.10 per mile

My modeling, based on my average time and distance in a fare would yield absolutely disastrous results, a 71% reduction in income, and earning under half of minimum wage. Those income rates are at IRS Standard Deduction Rates, but with these ugly lease options, actual cost is likely higher. Without constant surge, it's not survivable.

A YouTube user who goes by the handle Uber Man publishes information for drivers who work for ride-sharing companies, like tips on smartphone provider discounts or parsing Uber's payment breakdown. In late September, he put up a video advising drivers against Uber's deal with Santander:

"You get this nice little email from Uber saying, 'Guess what, you are approved for our special financing' [...] Stay away. Delete the email, you don't need to read it. Don't even log on, do not be enticed, do not get drawn in by their gimmicks, they make it sound great, but at the end of the day, they are screwing you over." is an active forum for drivers. Its operators told Valleywag: "The site is created by drivers, and is independent of Uber," although members have their doubts. Search for Santander on the forum and you'll find comments like this one from August:

The Uber lease is a scam.

The whole lease is based on 37,500 miles per year (yeah I know they advertise 40,000 with unlimited miles, read the fine print)

That means if you work 6 days a week (312 days a year)

you will have a daily limit of 120 miles per day.

Don't believe the marketing hype of unlimited miles and so on.

Read the fine print.

It's a 4 year and 4 months lease.

If you break it early you pay big time per every mile over the allowed.

They also round the years down, so 1 year and 11 months is considered 1 year.

If you work like most of us 60,000-100,000 miles per year

you will end up with no car and $20,000 still owned on the car.

Or this comment from the same thread about financing options:

Yeah, it was actually over a month ago when I first signed up at Uber but then stalled on the car deal, whew! Thank God! I just heard that Uber LA is offering a Ford dealership option. Good!!

If Uber doesn't want to ruin their reputation any further, they'll stop the Santander collaboration asap.

The Uberpeople thread "Lease-to Own, Can i make money in LA, Am i Crazy" is particularly lively. Responses to this discussion on the sub-Reddit for Uber drivers warning about Santander deals through Uber are also eye-opening.

One commenter said they passed on the Uber/Santander deal after doing some research beyond Uber's claims:

You might be better off finding a lawyer and getting out of the Penske/Santander deal ASAP!! Probably could based on bad faith, selling off 'your' car, etc. Santander is like mafioso, horrendous company with a class action suit filed last year. I passed on the Uber/Santander option after a little research. Then go for the Ford, at least they're honest here in SD.

Another suggested it was unwise to go into debt to Uber:

All this nonsense aside... Stay away from any type of Uber-sanctioned vehicle financing. Uber is not a bank or credit union. Drive for them, but acquire debt elsewhere.

A separate discussion on Reddit about the terms offered to UberX drivers elicited similar admonishments:

The leases are totally not worth it. The rates are ridiculous. It's for people who absolutely will not be able to buy a new car. And I didn't find the Uber discounts at the dealership very appealing.

Those kind of warnings are little help to borrowers with bad credit who don't have better options. In its front-page investigation about the subprime auto lending bubble, the New York Times said financial firms position subprime lending as an opportunity to the underserved, albeit at their expense:

In their defense, financial firms say subprime lending meets an important need: allowing borrowers with tarnished credits to buy cars vital to their livelihood.

[...] That ability to contain risk while charging fees and high interest rates has generated rich profits for the lenders and those who buy the debt. But it often comes at the expense of low-income Americans who are still trying to dig out from the depths of the recession, according to the interviews with legal aid lawyers and officials from the Federal Trade Commission and the Consumer Financial Protection Bureau, as well as state prosecutors.

Speaking of the recession, Fortune says Uber's financing program was actually the brainchild of a former commodities trader for Goldman Sachs:

The original vision for Uber's financing plan came in 2012 from an ex–Goldman Sachs commodities trader named Andrew Chapin, who was working in Uber's New York "driver operations" group. Chapin had become an expert in how limo drivers financed their rental arrangements with livery services. He recognized that limo and taxi drivers got a fairly raw deal compared with what they could make with Uber. The catch was that many drivers were immigrants with poor or no credit histories and were in no position to finance a commercial vehicle. During a routine New York taxi commission visit with Kalanick, Chapin pitched the boss on his plan: Create a program to help finance drivers using their demonstrably reliable cash flows from Uber as a way around their spotty credit.

With cash flows demonstrably unreliable and civil investigations around the corner, Uber wouldn't suffer from adding some more asterisks to its emails.

Update: Uber responded to our post through the Wall Street Journal:

A spokeswoman for the ridesharing startup said in an emailed statement Tuesday that it has helped "thousands" of drivers purchase new cars through its one-year-old financing program, collectively saving them "millions" of dollars.

[...] Uber's spokeswoman declined to comment specifically on whether the company helps subprime borrowers get loans they can't afford. "We created Uber's Vehicle Financing Program in response to consistent feedback from potential drivers about barriers to entry in owning a car," she said in the emailed statement. "It provides drivers with discounts on cars as well as access to financing that may not otherwise be available to them."

To contact the author of this post about Uber's leasing program, please email