Bill would aid New York cabbies who can't make loan payments
In a move meant to help New York City taxi drivers struggling to pay their medallion loans, members of the local congressional delegation have introduced legislation that would reduce the tax obligations for cabbies who receive debt relief.
The bill dovetails with a debt-forgiveness plan that is under development by a task force in New York City. Both efforts come in response to hundreds of bankruptcy filings by low-paid New York cabdrivers who took out high-cost loans that contributed to a boom and subsequent bust in medallion prices.
In some cases, borrowers owed a total of $1 million or more, their payments only covered the interest that they owed, and their interest rates spiked if they failed to repay the debt within a few years.
“In total, they owe hundreds of millions of dollars on their medallions,” Rep. Gregory Meeks, D-N.Y., said at a press conference Friday in New York, “while the price of a medallion has fallen about 80%.”
The bill, which is sponsored by Meeks, would prevent medallion debt that gets forgiven from being treated as gross income for tax purposes. It is being co-sponsored by the other members of the New York City congressional delegation, plus three representatives whose districts are on Long Island.
Advocates for cabdrivers, who have faced an explosion of competition from app-based services such as Uber and Lyft, have been pushing for a debt-forgiveness plan. They reacted positively this week to reports about efforts by the New York City panel to form a public-private partnership that would purchase medallions at discounted prices and take steps to ease the financial burdens on borrowers.
Advocates said that the new federal legislation addresses New York City Mayor Bill DeBlasio’s request — amid loud calls for action by the city — that Congress also provide a financial commitment.
“I feel more optimistic than ever before that we are going to win our campaign for debt relief,” Bhairavi Desai, executive director of the New York Taxi Workers Alliance, said in an emailed statement.
The federal legislation would benefit not only medallion owners whose debt gets forgiven by the public-private partnership, but also those who receive relief from a bank.
The bill has the support of Signature Bank, which said that it has agreed to forgive more than $75 million of principal debt for more than 250 medallion borrowers.
“We think we’re the only bank who’s been doing this sort of debt forgiveness plan,” Scott Shay, the chairman of Signature’s board, said in an interview Friday. “We’d like other banks to do this, because we think it would help keep taxi medallion owner-drivers in their cabs.”
The $49.4 billion-asset Signature, which is based in New York, had $9.67 million in taxi medallions on its books at the end of September 2019, more than 95% of which were at least 90 days past due, according to a regulatory filing.
During the previous nine months, the bank sold and settled $59.6 million in medallion loans, according to the filing.
One of the largest owners of New York City taxi medallion loans is now the National Credit Union Administration, which assumed control of the loans following the failure of credit unions that had concentrated on the medallion lending business. Last year the city found in a survey that only 9% of taxi drivers whose loans from two credit unions were taken over by the NCUA had gotten debt relief.
The credit union regulator is currently facing scrutiny over reports about a planned sale of its medallion loans. “We can’t allow them just to sell the loans to the highest bidder,” Meeks said at Friday’s press conference.
An NCUA spokesman said in an email that the agency is unable to comment on any specific aspects of its resolution strategy, since the assets involve personal financial information that is confidential.
“However, the NCUA is committed to finding a solution that is sensitive to the needs of medallion holders and their families and that meets our statutory obligations to minimize potential losses to the National Credit Union Share Insurance Fund,” the spokesman said.