In recent months, many companies forming the new "sharing economy" have come up against regulatory hurdles as they become part of the formal business landscape. In New York, half of Airbnb's rentals have been found to be technically illegal, according to state law. Ride-sharing service SideCar is also coming under scrutiny in Austin, Philadelphia, and New York City.
Now, the popular peer-to-peer car sharing service RelayRides is the most recent company to face regulatory pressure. The start-up received a cease-and-desist letter from New York State's Department of Financial Services (DFS), which charged RelayRides with "false advertising and violations of insurance law." In addition to the cease-and-desist, DFS has also issued a "scam alert" because of fine print in New York insurance law that could leave car-sharing users unprotected in the event of an accident. According to the DFS, these car-sharing programs could even violate users' existing insurance policies and cause them to lose their coverage.
In an email to users, RelayRides' CEO Andre Haddad said that beginning May 16th and until further notice, renters would no longer be able to make reservations for New York vehicles.
"We are actively working with the Department to address [its] concerns," Haddad said in the email. "While we’re cooperating with the Department on these changes, we will be suspending activities that it considers non-compliant."
New York's rigid regulatory environment has proven particularly hostile to car-sharing, ride-sharing and taxi-hailing apps. But as peer-to-peer sharing options gain popularity around the country - and, indeed, around the world - governments would perhaps do well to adapt to the changing business landscape (and take advantage of the additional revenue these companies bring in).
This post was originally published on Smartplanet.com