New York City Mayor Bill de Blasio’s investigation into taxi medallions lambasted the National Credit Union Administration for not doing enough to help borrowers struggling to repay these loans.
Nearly two-thirds of drivers surveyed for the report said that their loans were issued by a credit union, including institutions that were eventually taken over by the NCUA. But many credit unions and the NCUA were reluctant to provide relief on these loans, the report found.
For instance, only 9% of cab drivers with loans issued by Melrose Credit Union and only one borrower with a loan from LOMTO Credit Union surveyed for the report said that NCUA had taken steps to reduce monthly loan payments or modify the loan’s principal. Those two institutions were the largest seized by NCUA.
The 45-day investigation was launched after The New York Times released a scathing exposé on taxi medallion lending practices in June. The Times reported
“Survey results support prior reports from drivers that credit unions taken over by the NCUA are often the least willing to work with drivers struggling to afford their monthly loan payments,” the investigation concluded.
The average median debt owed by surveyed drivers was about $500,000, well above the secondary market value of the medallions. Over a quarter of surveyed drivers said that they have considered declaring bankruptcy.
Many of the failed medallion lending credit unions were liquidated by the NCUA, meaning that the regulatory agency is tasked with working with those borrowers to modify loans. Some of the institutions that were eventually liquidated had also spent time in conservatorship.
“Our goal is to help taxi drivers preserve their livelihoods while also ensuring they can afford to make payments on performing and sustainable loans,” an NCUA spokesperson said in an email to Credit Union Journal. “We understand that behind many taxi loans are individuals and families impacted by the harsh reality of the current taxi medallion market.”
The NCUA spokesperson said that these efforts are complicated given the fluctuating value of collateral used to secure these loans, but that the agency remains “committed to balancing the needs of these borrowers” while also “meeting the congressionally mandated requirement for the NCUA to ensure the safety and soundness of credit unions and the National Credit Union Share Insurance Fund.”
Despite lenders claiming that they’ve met with taxi drivers to modify loans, only 15% of drivers reported that lenders have reduced monthly payments or total debt owed, according to the report. Signature Bank was found to be the lender that worked with borrowers most frequently. Eleven drivers, or 39%, reported receiving a modification from Signature, according to the report.
Four credit unions were noted to be the least likely to work with borrowers. Those CUs — First Jersey Credit Union, Progressive Credit Union, LOMTO and Melrose — all have been liquidated or acquired. For instance, only four out of 45 loans from Melrose have been modified, according to the report. Borrowers with loans from First Jersey reported that they did not receive a modification.
The mayor's office did not respond to a request to clarify why these institutions were listed in the report as being the least likely to work with borrowers given they have been taken over by regulators.
Both the Independent Community Bankers of America and the American Bankers Association have used the taxi medallion issue to criticize NCUA and the credit union industry. The
The investigation also announced the creation of a driver assistance center, which is expected to increase access to financial assistance and mental health resources. Services from the center would provide help from credit and finance professionals to advocate on the behalf of drivers.
Despite New York City's move to tighten regulations on purchasing and refinancing taxi medallions, de Blasio is not planning a complete bail out at this time of struggling cabbies. The mayor’s office noted that $13 billion for relief would be needed.
But the New York Taxi Workers Alliance disagreed, saying that the mayor's office "grossly miscalculate[d]" the estimate, and argued that forgiveness for taxi medallion loans would range from $1.8 billion to $2.7 billion.
“I have to be honest,” de Blasio said during a news conference on Monday in reference to a bailout. “We just went through a budget process where for the first time we asked agencies to find savings and efficiencies at a high level.”
