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Uber and Lyft suspend service in Austin after city passes law for stricter background checks

Posted at 2:17 PM, May 09, 2016

AUSTIN, Texas (AP) — Uber and Lyft on Monday suspended their ride-hailing services in Austin after voters decided against overturning city requirements that include fingerprinting their drivers.

But following Saturday's vote, a lawmaker who is a rideshare supporter said that when the Texas Legislature reconvenes next year it will consider establishing statewide regulations for rideshare companies that will aim to be "consistent and predictable."

"It has become increasingly clear that Texas' ridesharing companies can no longer operate effectively through a patchwork of inconsistent and anti-competitive regulations," Republican Sen. Charles Schwertner of Georgetown told the Houston Chronicle on Sunday. "As a state with a long tradition of supporting the free market, Texas should not accept transparent, union-driven efforts to create new barriers to entry for the sole purpose of stifling innovation and eliminating competition."

The Austin American-Statesman reported nearly 56 percent of voters rejected a proposition Saturday that would have repealed rules the Austin City Council approved in December.

Under the rules, drivers must undergo fingerprint-based background checks by Feb. 1, 2017. Uber and Lyft prefer name-based checks. The city's ordinance also prohibits drivers from stopping in traffic lanes for passenger drop-offs and pickups, requires "trade dress" to identify vehicles for hire and imposes a variety of data reporting requirements.

The finger-printing question was the key fight in the campaign. Uber and Lyft had poured nearly $9 million into their campaign to overturn the rules.

Advocates for fingerprinting said it's the best way to weed out drivers with criminal records. Ride-hailing companies have said their background checks suffice and that fingerprint databases can be out of date. Fingerprinting can also slow down the process of quickly adding new drivers.

Austin appeared to be the chosen battleground for ride-hailing companies that are facing similar restrictions in major cities across the country, including Chicago, Los Angeles and Atlanta.

Houston imposed its own rules requiring fingerprint background checks 18 months ago, prompting Lyft to leave the city. Uber stayed, but its general manager recently wrote a letter to the Houston City Council saying it would ultimately leave if the regulations were not repealed.

In Iowa on Monday, Gov. Terry Branstad signed a bill into law that creates new statewide rules for ride-hailing companies to do business there. The law establishes a regulatory system that will require liability insurance for vehicles, add name-based background checks for drivers and change licensing expectations. State regulators would also have the authority to ensure compliance.

Branstad acknowledged the bill started off as a "difficult, contentious issue" but later received unanimous support in the state House and Senate.

The new law in Iowa mirrors similar legislation enacted in more than two dozen other states, said Sagar Shah, a general manager for Uber. Shah acknowledged some states and communities have challenged proposed legislation.

"A lot of states are still understanding the new industry and a lot of education is continuing to go on," Shah said.

Schwertner was among several state lawmakers to decry Saturday's vote in Austin.

"Local control turns to local tyranny again in Austin," tweeted Republican state Rep. Matt Rinaldi of Irving. "#txlege needs to intervene." GOP state Rep. Tony Dale of Cedar Park tweeted a photo of a request for an Uber car to come to the Texas Capitol and a simple message: "See you in 2017."