Uber Claims Another CU

June 27, 2017 at 9:02 am 3 comments

LOMTO Federal Credit Union based in NYC was placed into conservatorship by NCUA yesterday for what the NCUA described as  “unsafe and unsound practices at the credit union”  the $236 million asset credit union  becomes the third NYC based CU specializing in taxi medallion loans to be conserved following Melrose and Montauk, which was merged into Bethpage FCU.

The credit union is the latest example of how the rise of Transportation Network Companies has transformed the NYC taxi industry,  turning taxi medallions from arguably the  safest and best performing loans into  toxic liabilities in the blink of an eye. When Uber started offering rides in NYC in 2011 the credit union had a ratio of delinquent loans to total assets of 0.00.  In March,   that ratio had risen to 20.55 and  its net worth  to total ratio has tumbled from over 15% to  5.96%.

Before you pass too much judgement on credit unions in trouble because of these loans remember that taxi credit unions prospered for decades.  LOMTO was chartered in 1936 . This is not just  a banking parable; it is an example of how rapidly technology is being harnessed to upend erstwhile  business models.

Entry filed under: New York State. Tags: , .

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3 Comments Add your own

  • 1. Michael Murrock  |  June 27, 2017 at 10:07 am

    How is this different from a CU loading up on low-rate, fixed-rate mortgages and not anticipating a rise in interest rates? If the “powers that be” had their collective heads in the sand and didn’t notice the potential change in the environment, shame on them. I’d bet they had opportunities to either sell some of these loans or at least participate them out to lower their exposure.

    Reply
  • 2. Anonymous  |  June 27, 2017 at 10:35 am

    They did participate them out to other CU’s who are getting hurt as well. You clearly do not understand the complete picture concerning this matter.

    Reply
  • 3. John C Gibardi  |  June 27, 2017 at 10:38 am

    They did participate them out to other CU’s who are getting hurt as well. You clearly do not understand the whole picture concerning this matter.

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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