Capital One subpoenaed by N.Y., feds over taxi loans
Capital One Financial has received subpoenas from federal and state prosecutors who are scrutinizing loans to taxi drivers, the company disclosed Thursday.
The McLean, Va., firm said that it received a subpoena from the New York Attorney General’s office in August. In October, Capital One got a second subpoena from the civil division of the U.S. Attorney’s Office in Manhattan.
Loans that required payments of $1 million or more went to low-paid cab drivers, hundreds of whom later filed for bankruptcy. The payments often covered only the interest that borrowers owed, and interest rates spiked if the loans were not repaid within a few years. From a lender’s standpoint, the loans only made sense as long as medallion prices continued to rise.
Capital One said in a securities filing Thursday that it started exiting the taxi medallion finance industry in 2015. It also stated that the two subpoenas seek information about its lending counterparties and practices.
“We are cooperating with these investigations,” Capital One said.
Capital One got into the medallion finance business in 2006 with its acquisition of North Fork Bank. As recently as November 2013, the company’s executives were touting the taxi market’s resilience in the face of new competition from the likes of Uber.
Besides Capital One, bank lenders that participated in the taxi medallion market in New York City included Signature Bank, New York Community Bank and Medallion Financial. Numerous credit unions were also significant players.
Signature Bank, New York Community Bank and Medallion Financial have yet to file quarterly disclosures with the Securities and Exchange Commission for the period that ended on Sept. 30.