Uber avoids court with $10m settlement on background checks
Uber will pay at least $10m to settle allegations by California prosecutors that it misled passengers about the quality of its driver background checks. The settlement was signed yesterday in San Francisco, where the district attorney led a lawsuit that said Uber falsely claimed its criminal screening of would-be drivers was the most comprehensive available. Under the settlement, Uber agreed to pay $10m within 60 days, however, if the company does not comply with the terms over the next two years, it would have to pay an additional $15m. The settlement means yet another potentially embarrassing court hearing will be avoided, with an Uber representative stating: ““We’re glad to put this case behind us and excited to redouble our efforts serving riders and drivers across the state of California…”

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Uber agreed Thursday to pay up to $25 million to settle a 2014 lawsuit filed by city officials in San Francisco and Los Angeles who argued that the ride service gave customers a “false sense of security” by touting its background checks as the toughest in the industry.

The suit, brought by San Francisco District Attorney George Gascón and Los Angeles District Attorney Jackie Lacey, alleged that Uber misled consumers by suggesting its driver-screening process was superior to the ones used by taxi companies. Taxi drivers are vetted with fingerprint checks, whereas Uber drivers are not.

The suit also questioned Uber’s compliance with California laws regarding airport rides and fare calculation.

Under the terms of the settlement, Uber will pay $10 million within 60 days, according to Gascón’s office. The remaining $15 million penalty will be waived in two years if Uber complies with all of the settlement’s terms.

“The result we achieved today goes well beyond its impact on Uber,” Gascón said. “It sends a clear message to all businesses, and to startups in particular, that in the quest to quickly obtain market share, laws designed to protect consumers cannot be ignored. If a business acts like it is above the law, it will pay a heavy price.”

The settlement averts a courtroom fight that could have proved embarrassing for San Francisco’s Uber, which has a history of tangling with government regulators at home and abroad. The money will be split between the two district attorneys’ offices.

“We’re glad to put this case behind us and excited to redouble our efforts serving riders and drivers across the state of California,” an Uber representative said.

Uber’s ride-hailing rival Lyft paid $500,000 in 2014 to settle similar allegations from the two district attorneys.

Uber took a hit to its public image when Gascón discovered 25 instances in which San Francisco and Los Angeles Uber drivers had serious criminal backgrounds. The drivers included sex offenders, identity thieves, burglars, kidnappers and a murderer.

Gascón also questioned Uber’s compliance with a California law allowing regulators to check the app’s fare calculations for accuracy. The state has since found Uber’s fare calculations accurate in initial testing. It issued a temporary use permit for the company in August so the company could legally operate while working toward full state certification.

As part of Thursday’s settlement, Uber promised to operate only in airports where the company has permission. When the suit was filed in December 2014, Uber had just reached an agreement with San Francisco International Airport to pick up and drop off passengers there. But the company had not yet received approval from any other airports, even though it encouraged its drivers to work at other airports, according to the suit.

Uber now has permission to operate at all three major Bay Area airports as well as Los Angeles International Airport and others in southern California.

Uber has raised $9.01 billion from more than 50 investors and is valued at more than $60 billion. But it continues to rile regulators.

The company paid $28.5 million in February to settle two class-action lawsuits filed on behalf of customers challenging Uber’s representation of its background checks. As a result, the company agreed to rename its “safe ride fee” to a “booking fee.”

Jessica Floum is a San Francisco Chronicle staff writer. Email: jfloum@sfchronicle.com Twitter: @jfloum