Report Highlights Role of Brokers, NCUA, in Medallion Crisis

July 9, 2019 at 8:59 am Leave a comment

A much anticipated report of the medallion lending industry by New York City Mayor Bill de Blasio released yesterday heaped criticism on the role medallion brokers played in providing inadequate assistance to drivers who purchase NYC medallions but also implicitly criticized NCUA for being too inflexible in allowing credit unions to modify medallion loans. The report comes in response to an extensive investigation of the taxi medallion industry after a series of articles by the New York Times criticized lending practices in the years prior to Uber and Lyft.

According to the report nearly 2/3rds of surveyed drivers reported that their loan is held by a credit union or is insured by a credit union subsequently taken over by the NCUA. Nevertheless, according to the survey respondents “credit unions taken over by the NCUA are often the least willing to work with drivers struggling to afford monthly loan payments.”

The report also contains a lot of troubling statistics for anyone hoping to see medallion prices stabilize at least without further movement towards modifications. For example, the survey drivers reported a median medallion purchase price of $340,000 with approximately $500,000 still owed on the loan. In addition, a sizable portion of medallion holders indicate that they are considering filing for bankruptcy.

But the major focus of its ire  was on the role that brokers play in helping drivers obtain medallions. According to the report, while there is no requirement that a broker could be used to arrange a medallion purchase, the vast majority of owners do in fact use a middle man. If the report is accurate, many drivers should be asking for their money back from these brokers. They often failed to explain the complicated terms of these transactions, didn’t bother putting their broker arrangements in writing and often fail to disclose when they had conflict of interest such as having a monetary interest in a medallion for which they are seeking a servicer.

Oddly missing from the report is any mention of Uber or Lyft. While it is perfectly legitimate to investigate the past practices of the medallion industry, it is strangely myopic to investigate the short comings of the medallion industry without even referring to the two companies which undermine what had been one of the most stable industries for the past seven decades. It’s kind of like investigating the Great Recession without mentioning mortgage-backed securities.

 

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

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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