New York City Taxi Lenders Face Risks After Uber Suit Dismissed
Four credit unions that have lent out large sums of money for taxi medallions, which yellow cab drivers need to operate, had sued the city of New York, arguing that Uber’s technology infringed on the drivers’ exclusive rights to pick up passengers who hail them on the streets.
Queens County Supreme Court Judge Allan Weiss dismissed the suit on Sept. 9, saying that the city’s Taxi and Limousine Commission has actively engaged in regulating the introduction of “e-hailing” services.
“A catastrophe is unfolding, as an entire industry continues to be illegally destroyed, while elected officials allow it to happen on their watch,” Todd Higgins, attorney for the lenders, said in a statement. Taxi medallions are metal shields bolted to the hood of yellow cabs in New York City. The number of medallions is limited by the city and they sell for very high prices – as much as $1 million as recently as 2011.
The four lenders – Melrose Credit Union, Montauk Credit Union, Progressive Credit Union and Lomto Credit Union – have argued that Uber has driven down the value of New York Taxi medallions by as much as 40 percent. They hold nearly $2.5 billion in taxi medallion loans covering around 5,300 medallions. Delinquencies at the credit unions have soared in the past year, according to financials filed with their regulator, the National Credit Union Administration (NCUA).
Melrose, for instance, had more than 10 times as much in loans that were more than 60 days delinquent than a year earlier. The credit union said it has nearly $400 million in delinquencies and troubled debt restructurings in its medallion loan portfolio.
Credit unions are non-profit, member-owned financial institutions. Members’ accounts are insured to the limits of the NCUA’s insurance fund. The NCUA said it carefully reviews its credit unions’ lending and risk-mitigation plans and has issued guidance about taxi medallion lending.