Just 24 hours after the National Credit Union Administration sold off hundreds of millions of dollars in distressed taxi-medallion loans, New York State Attorney General Letitia James said she plans to sue the city for $810 million. The taxi medallions, which supposedly give owners the exclusive right to pick-up street hails in NYC, have plummeted in value in recent years, as app-hailing companies have overtaken city streets, forcing drivers into bankruptcy and foreclosure.
The implosion started during Mayor Michael Bloomberg’s administration, which booked hundreds of millions of dollars in municipal revenue from the roller-coaster marketplace. There have been multiple suicides committed by drivers – including one at the gates of City Hall. Some experts say the city willfully inflated the price of the medallions and permitted taxicab brokers to also drive up the prices.
“Government should be a source of justice, not a vehicle for fraudulent practices,” James said. “These taxi medallions were marketed as a pathway to the American Dream, but instead became a trap-door of despair for medallion owners harmed by the TLCs unlawful practices. The very government that was supposed to ensure fair practices in the marketplace engaged in a scheme that defrauded hundreds of medallion owners, leaving many with no choice but to work day and night to pay off their overpriced medallions.”
In a press release, James asserted that the “TLC knew their actions were affecting some of the city’s most financially-exposed immigrant families.” She said that her action was aimed at making the drivers “whole again” by refunding them “the hundreds of millions the city unlawfully pocketed.”
“Substantial financial restitution is owed to yellow-taxi owner-drivers devastated by the city’s recklessness throughout Bloomberg’s tenure,” she said.
“This lawsuit is the first potential avenue toward that resolution,” said Bhairavi Desai, executive director of the Taxi Workers Alliance (TWA), which represents 21,000 cab, black-car, Uber and Lyft drivers. “It is long overdue, and we hope this is just the beginning of the support drivers receive as we continue our fight for debt forgiveness and lesser monthly mortgages.”
A spokesperson for Mayor de Blasio criticized Ms. James for launching a “frivolous investigation” into an administration she said inherited the crisis.
The collapse in the medallion mortgage market that came with the steep decline in taxi drivers’ income undermined two New York credit unions, the Melrose Credit Union and the LOMTO Credit Union, requiring the NCUA to step in and take over the portfolio of distressed loans.
It had been the goal of the TWA to convince the NCUA to hold off on selling the loans so the city could act on the recommendations of a blue-ribbon panel appointed by the Mayor to form a private-public partnership to buy the loan portfolio and provide medallion owners affordable payment plans.
In Feb., members of the TW traveled down to the NCUA’s headquarters in Virginia in hopes of dissuading the regulator from selling the 3,500 yellow-taxi medallions that had previously been held by the two failed credit unions.
The NCUA, which is the equivalent for credit unions what the FDIC is for banks, said in a statement that it sold off the loans to Marblegate Asset Management LLC because it was the “most appropriate action to meet its statutory obligation” to preserve the National Credit Union Share Insurance Fund.
The NCUSIF is the fund that guarantees up to $250,000 in individual credit members deposits.
“Of equal importance, this sale provides borrowers and their families greater certainty about the management of their loans,” the NCUA. “There is nothing associated with this transaction that prevents a public-private partnership or any private investor from seeking to purchase these assets at a later date.”
Source: The Chief