Photograph by Al Seib — LA Times via Getty Images

The California Public Utilities Commission wants to impose a four-month contract minimum.

By Kia Kokalitcheva
April 20, 2016
April 20, 2016

Uber and Lyft’s supply of drivers in California could soon be stifled.

On Thursday, the California Public Utilities Commission, or CPUC, will consider additional requirements for drivers for Transportation Network Companies (a technical term for companies such as Uber and Lyft) who rent or lease their cars. The proposal would require that drivers sign rental or lease contracts for at least four months.

The debate derives from current regulations, which stipulate that drivers for these services can use a “personal vehicle,” distinguishing the classification from vehicles leased or purchased specifically for commercial purposes, such as limousine.

However, Uber and Lyft argue that leased and rental cars do fall under this definition of “personal vehicle,” with Lyft further arguing to the Commission that it “comports with the ordinary meaning and common understanding of the term ‘personal vehicle,’ since millions of Californians lease or rent vehicles for personal use,” according to the proposal.

Adding these additional requirements undoubtedly would affect Uber and Lyft’s supply of drivers. On Monday, Uber sent an email to its California riders alerting them of the proposal and asking them to contact the CPUC to oppose it.

“Uber has begun offering innovative solutions to ensure that qualified drivers, regardless of their credit history or ability to purchase a vehicle, have access to a personal car and the opportunity to earn additional income on the Uber platform. Help promote opportunity for all Californians,” Uber said in the memo.

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Currently, Uber has a car rental program in partnership with Enterprise letting drivers rent a car on a daily or weekly basis, and it’s available in three California locations: San Francisco, Los Angeles, and San Diego. It also has a car leasing program available in several California cities permitting drivers to cancel after the first 30 days with a two-week notice. However, because it requires drivers to sign a 36-month lease on the outset, regardless of whether they change their mind earlier, the proposed limits wouldn’t affect it. The proposal’s language only mentions a contract of four months.

Uber declined to comment on the proposed limitations at this time.

While Lyft’s car rental programs through Hertz and General Motors aren’t currently available in California, the company also has interest in keeping these potential limits at bay as it’s likely planning to eventually expand them to its home state. Lyft also has a short-term leasing program in California with Evercar, an electric vehicle rental service.

“These programs help thousands of people in cities across the country quickly and easily become a rideshare driver as a flexible way to make ends meet. We urge the Commission to support a framework that keeps the many benefits ridesharing provides to drivers, passengers and our communities,” a company spokeswoman told Fortune.

There are also a few companies like Breeze and Hyrecar, both of which base their entire businesses on renting out cars to folks who don’t have one but want to work as drivers for Uber, Lyft, or delivery services. As some provide cars on a weekly basis, the four-month minimum requirement could heavily impact some of them. Breeze, however, changed its business model in mid-2014 from charging drivers on a daily basis to long-term leases.

“The CPUC’s proposal doesn’t affect us, as we provide 36-month flexible leases than can be cancelled with two weeks’ notice. That being said, it’s unfortunate to see a proposal that would limit other forms of flexible vehicle access,” Breeze co-founder Ned Ryan said in a statement to Fortune.

For ride-hailing companies like Uber and Lyft, hiring as many drivers as possible is hugely important. In addition to the combatting driver churn rates, the strategy contributes to keeping passenger pick-up times as low as possible. The more drivers available at a given time in a given place, the less time that a passenger will have to wait to be picked up—and the less likely they are to close the app and use a competing service with a shorter wait time.

Fortune has reached out to Hyrecar and the CPUC and will update the story upon response.

The story has been updated with a comment from Breeze and a clarification of its business model.

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