The federal government has created a crisis for thousands of middle-class yellow taxi owners who are under siege from the National Credit Union Administration (the NCUA). By foreclosing on taxi medallions and refusing to work with owners seeking to pay back their loans, the NCUA is senselessly creating more long-term financial challenges for the City of New York and its yellow taxi industry.
We have raised this issue before but we are raising it again now, as the City Council’s new Committee on For-Hire Vehicles enters its first budget process, because we are urging all stakeholders to stand up and raise their voices against the federal government’s unfair tactics.
First of all, we sincerely applaud the work the Committee has already done to spark discussions about poor regulatory decisions by the city’s Taxi and Limousine Commission (TLC). At the same time, we are urging all stakeholders to recognize that the NCUA’s misguided push to foreclose on taxi medallions represents a truly urgent and existential threat to an industry that provides living wage employment to tens of thousands of hardworking immigrant drivers across the city. As such, we are urging the Committee to formally demand that President Trump and the NCUA halt all medallion foreclosure proceedings and end their assault on middle-class taxi owners.
New York City taxi medallions, once worth more than $1.3 million each, have plummeted in value to as low as $200,000 or less. The initial purchases of these medallions, as well as the loans that made those purchases possible, took place because of lenders such as banks and credit unions – one of the largest of which was Melrose Credit Union – whose loans were collateralized by the medallions. Of course, the precipitous drop in medallion values has now left virtually all of these loans under-collateralized. This drop in the value of the medallion is in large part the result of an unequal regulatory playing field with companies such as Uber and Lyft.
The end result is that many medallion owners, through no fault of their own and due to the failure of city and state governments to equally regulate all sectors of the for-hire vehicle industry, are currently unable to pay back their loans in full. However, that difficulty need not result in loans being written off. Generally, taxi medallion owners are not seeking to walk away from their loans and personal liability.
Recognizing this, most lenders – including banks and credit unions – have responded by working with medallion owners and reducing interest rates, deferring interest, or simply allowing owners to split their obligations so they can continue making payments. When it is actually put into practice, this kind of good faith behavior ensures that medallion owners and their families are protected from further financial hardship as long as they continue doing the right thing and paying back the loans.
The only lender that is refusing to work with medallion owners is Melrose Credit Union, which is currently in receivership under the control of the NCUA and the Trump Administration. Regardless of each owner’s outstanding debt, the NCUA has taken a hardline, one-size-fits-all approach that demands massive upfront principal payments of several hundreds and thousands of dollars and/or mortgages on residences to renew loans. Even if the borrower complies with its demands, the NCUA has sought to substantially increase the interest rate on its loans.
In doing so, Melrose, under the direction of the NCUA, has placed medallion owners in a position in which they know that they will be put in default, thereby forcing them to face personal financial ruin and seek protection in bankruptcy court. The NCUA’s position is so extreme that it told borrowers – even those who are current on their loans and making all payments – that if a medallion is in storage for any reason, the NCUA will immediately commence foreclosure proceedings. The NCUA will not even fix clearly incorrect provisions in its loan documents. Industry representatives and medallion owners have been told repeatedly no changes will be made, even if this would result in the borrower being instantaneously in default the moment they sign loan documents.
By foreclosing on hundreds of medallions – and not having buyers for all of them – the NCUA will destroy the remaining value of New York City taxi medallions. This will result not only in hundreds of millions of dollars of loans being written off – loans for which borrowers want to make payments – but it will also destroy the value of every other lender’s medallion portfolio and force thousands of borrowers into financial ruin.
If public officials – including city and state governments – join with thousands of middle-class, immigrant medallion owners to speak out and stand up against the Trump Administration, the NCUA will be forced to understand the gravity of this situation and explore other options for engaging with medallion owners.
It is crucial that all stakeholders take action to engage on this issue and formally demand that President Trump and the NCUA halt all medallion foreclosure proceedings and end their assault on middle-class taxi owners. If this situation is left unchecked, the seismic impact on thousands of medallion owners will create even more long-term financial challenges for the City of New York and stakeholders across the taxi industry.
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David Beier is the president of the Committee for Taxi Safety.
