Mike Oze-Igiehon is a former Uber driver based in Perth who is suing Uber for firing him after encouraging him to take out $80,000 worth of car loans.
The case is a first for Australia, and Mr Oze-Igiehon is seeking compensation to cover the cost of his car loans, loss of income, and medical treatment for the depression he has suffered since being fired unexpectedly. He had quit his job as a security patrol officer in November 2015 before being fired just a few weeks later.
The Uber Driver’s Case
Mr Oze-Igiehon had been approved for two car loans during his 6 month stint as an Uber driver, and one was approved when Uber was his sole source of income. He applied for this loan after receiving regular email alerts to Uber drivers advertising discounts with Toyota car loans. He took out the loan through a Toyota dealership in Perth.
In his case, Mr Oze-Igiehon alleges the overseas giant breached its contract with him by not passing on any negative feedback before firing him suddenly last November.
“If I was guilty … they should have brought it to my attention,” says Mr Oze-Igiehon.
Uber has defended its actions, saying the nature of the complaints – that Mr Oze-Igiehon was driving tired and “almost fell asleep at the wheel twice” – was reason for immediate termination. They say the driver contract reserves the right to deactivate or restrict a driver from accessing the Uber app “at any time” at their sole discretion.
However, Mr Oze-Igiehon says it was negligent of the company not to inform him of these complaints and give him an opportunity to defend himself.
“The company is abusing their status in Australia. They are using a loophole in the system to penalise people and I think it’s unfair,” he says.
The news comes as Uber has been effectively legalised on in May 2016, after a case where the Victorian County Court overturned an earlier criminal conviction of an Uber driver. The case has been brought against Rasier Operations BV in the Netherlands, Uber’s parent company.
Mr Oze-Igiehon has rejected Uber’s $4,000 settlement offer and awaits a pre-trial court hearing in the District Court of WA next week.
Is that even legal?
In Australia, a driver will be eligible for a car loan – even with a bad credit history or no credit history at all – if the loan is for a business vehicle. This is because loans for business purposes are not covered directly by the consumer credit rules for personal loans or personal purpose car loans under the National Consumer Credit Protection Act 2009 (Cth).
Consumer Action Law Centre CEO, Gerard Brody, says this case highlights the need to update the credit laws to better protect small business borrowers working in the sharing economy.
Ride Share Drivers’ Association of Australia (RSDAA) founder, Dan Manchester, says Mr Oze-Igiehon’s ordeal is – sadly – not a unique experience, and that other drivers have had enough of being mistreated after investing in a ride-share business or franchise. Mr Manchester questions the idea that a company could allow an employee to buy a car through them one week, then sack the employee the next.
Can your employer make you get a car loan for a company car?
No employer in Australia is able to force an employee or franchise operator to do anything that is not in their contract of employment. In this case, nobody forced Mr Oze-Igiehon to take out a loan, but they did encourage him to do so through advertising in email newsletters to Uber drivers.
But Mr Oze-Igiehon entered into an employment contract with Uber, and he relied on that contract remaining in place when he took out a second car loan. That second car loan – which they had advertised to him – is another type of contract. The Law Society of NSW explains that if a contract is unfair to one party and the contract is enforced strictly, the entire contract may be void (meaningless).
The Law Society of NSW also points out that the Australian Consumer Law says selling a product to someone is unfair if one party does something “unconscionable” (excessively unreasonable). Since Uber knew that they were his only source of income when they advertised this loan to him, it is possible the court may decide they acted unconscionably in firing him after he took out the loan.
We look forward to seeing what the court decides in this case.
What About Novated Leasing?
A different legal option that your employer can encourage you to choose is salary sacrificing to buy a car. “Salary sacrifice” means that your company buys an item (such as a car) by taking out a loan in the company’s name that you must repay. Every payday, part of your pay packet goes towards making a repayment on that loan and a payment towards the employer’s Fringe Benefits Tax for the company car.
These salary packaging loans are also known as “novated leases”. You can find out more about this method on the ATO’s website.
If you think you have entered into an unfair car loan contract, you should see your solicitor immediately.
Should the lender have given him a car loan at all?
Knowing that Mr Oze-Igiehon’s only source of income was his job as an Uber driver, should the lender have given him a loan over the car that was his way of earning that income?
Technically, there is nothing legally wrong with it. Most people who take out a car loan only have one main source of income. As long as the lender had no reason to suspect Mr Oze-Igiehon would soon be fired, and they followed the National Consumer Credit Protection Act 2009 (Cth) (the NCCP Act) by using “responsible lending practices”, they have complied with the law.
What to do if you can’t pay off a car loan
If you do happen to lose your job during the several years that it takes to pay off a car loan, Australian credit laws (the NCCP Act) give you the right to apply for financial hardship to your lender. If approved, you will then be given special, easier arrangements to repay that loan over time.
If the lender does not approve your application, you can apply to External Dispute Resolution – a form of mediation that is cheaper and quicker than going to court and suing the lender (or your employer). If EDR is then unsuccessful, you still have the option of going to court.
How car loans work
CANSTAR regularly researches and rates car loans, and as a result, we have a wealth of information on how car loans work, finance traps to avoid, and how to find a good value car loan:
We always recommend that you do your homework about the fees and features involved in any loan before making a decision. Canstar’s comparison website can help you there, as we highlight the most outstanding value products with a 5-star rating.