Ride hailing giant Uber has agreed to pay $20m (£16m) to settle FTC charges that it recruited prospective drivers with exaggerated earnings claims, and also misled drivers on their finance agreements.

The main thrust of the FTC’s argument was that Uber had misled potential drivers with exaggerated earning claims and claims about financing.

The FTC alleged Uber claimed on its website that uberX drivers’ annual median income was over $90,000 in New York and $74,000 in San Francisco. In reality, the FTC alleged that drivers’ annual median income was $61,000 in New York and $53,000 in San Francisco.  In all, less than 10% of all drivers in those cities earned the yearly income Uber touted.

The accusation the FTC levelled against Uber regarding financing was that it offered a “Vehicle Solution Program” to connect prospective drivers with motor companies to buy or lease vehicles to use with Uber. The FTC said: “Uber has made numerous claims touting the low cost and unlimited mileage of its auto program, even though Uber has had no basis with which to make these claims. Indeed, the company has had no oversight of, nor has the company monitored, the terms and conditions of its drivers’ auto agreements through the Vehicle Solutions Program”

The FTC continued that in ‘many’ instances, drivers which used the Vehicle Solutions Program actually received worse than industry average rates, made payments for hundreds of dollars more per month than advertised, and entered into leases imposing costs for mileage.

It said that consumers paid at least $1,000 to enter into leases or retail instalments contracts for new or used vehicles at higher costs and worse terms than those advertised. Once Uber’s promised earnings did not materialize, and drivers attempted to cancel their auto agreements, the FTC said they incurred significant monetary harm.

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It added; “Uber has collected significant revenues from its drivers’ fares, including tens of millions of dollars from drivers participating in the Vehicle Solutions Program. Uber’s practices have caused its drivers to suffer millions of dollars of injury.”

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, commented: “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.”

In addition to imposing a $20m judgment against Uber, the stipulated order prohibits the company from misrepresenting drivers’ earnings and auto finance and lease terms. The order also bars Uber from making false, misleading, or unsubstantiated representations about drivers’ income; programs offering or advertising vehicles or vehicle financing or leasing; and the terms and conditions of any vehicle financing or leasing.