When Lawyers Send Letters

Car Sharing Service RelayRides Fined $200,000 by Cuomo Administration

Shots fired in the battle between regulators and the “sharing economy.”

"We pre-screen all drivers and provide $1 million insurance on every rental," RelayRides advertises on its site.

“We pre-screen all drivers and provide $1 million insurance on every rental,” RelayRides advertises on its site.

New York State dealt another blow on the sharing economy yesterday. The state Department of Financial Services announced that it is fining car sharing service RelayRides after a ten month investigation for $200,000 for false advertising and insurance law violation.

RelayRides is the “Airbnb of cars”, letting car owners to rent their personal vehicle like a Zipcar while they’re not using it. Part of the problem, according to the DFS, is RelayRides claimed on its website that “if something unfortunate does happen while your car is being rented, your insurance policy should not be touched.” This isn’t the case – in New York, when someone uses your car with your consent, they’re covered by your own personal liability insurance.

“RelayRides sold New Yorkers a false bill of goods,” Superintendent Lawsky said last May at the outset of the investigation. See, when you use your personal vehicle to start making extra cash, it could count as commercial use, which risks violating your leasing and finance agreement.

According to the DFS release, RelayRides sold insurance and adjusted claims without a license, making customers think they were covered in case of an accident or theft. The findings of the investigation echo concerns that when people rent their personal belongings for extra cash, it might not be clear how much they’re risking.

“We have been actively working with State officials to bring peer-to-peer car rentals back to New York as soon as possible,” a RelayRides representative told Betabeat via email. To do this, RelayRides will have to submit a new business plan to the DFS, who will now be vetting all of their advertisements.

For now, RelayRides is suspending all activity in the state of New York. RelayRides is backed by $18 million in funding from investors like GM and Google Ventures, so the fine won’t bring RelayRides down, or prevent it from operating in other states.

Regardless, in the struggle between government and the “sharing economy”, $200,000 is blood drawn. New York has been particularly aggressive against sharing apps, subpoenaing Airbnb for its user data last October.

Follow Jack Smith IV on Twitter or via RSS. jsmith@observer.com