Let’s Deal With the Medallion Mess, Once and For All

February 10, 2020 at 10:19 am 1 comment

First, this is one of those blogs where I want to remind you that the opinions I express are mine, and mine alone, and do not necessarily reflect the viewpoints of the Association.

In a letter to the NCUA last week, NAFCU explained to NCUA that its members have expressed concerns about how NCUA will ultimately determine what a fair sales price is for Medallion loans and stressed that “ultimately, if it is determined that a fairly-priced transaction is not feasible at this time for the entire portfolio of medallion loans, the NCUA should consider exploring other avenues to achieve a fair price in the most expeditious way possible.” Since the letter came shortly after a New York City task force urged NCUA to hold off on prematurely selling medallion loans, the comments have been seized on as signaling a split within the industry over what to do about these loans.

In fact, while there are undoubtedly differences between credit unions and within the industry about what to do, the fact that we are finally having this discussion is in everyone’s best interest. NAFCUs letter underscores the need for urgency. Simply put, doing nothing is not an option and the longer regulators, legislators and credit unions dither around about how to resolve these issues, the worse off everyone, including the medallion loan borrowers, are going to be. Conversely, there still is a window, albeit a shrinking one, for these same parties to come together and come up with a plan which mitigates the potential harm of a premature sale of medallion loans. Both sides have a point. Time is running out. But we should wait until the end of the legislative session to see if there is a way we can minimize the inevitable damage that will result from the sale of medallion loans.

First, if history is any guide, the price of medallions is going to continue to fall unless legislators’ step in. Since the beginning of the medallion crisis there has always been an assumption that at some point prices would stabilize. After all, the argument went, even if the prices of medallions were grossly inflated, surely tourists would continue to see a value in flagging the iconic yellow cabs as they check out the sights of New York City.

But this increasingly quixotic thinking is belied by the facts. According to the Task Force report, in May 2008 independent medallions sold for more than half a millions dollars and a package of two corporate medallions sold for $1.3 million. In contrast, by November 2019, the average sale price for medallions was $164,518, with a median price of $200,000.55. Throughout 2019, prices hovered around $200,000 and 66% of the medallion transfers that took place in 2019 were due to foreclosures.

We’re not putting the Uber genie back in its bottle. Your average consumer is more than willing to ditch the higher priced, often discourteous service, one receives in a yellow cab in return for a cheaper, better Uber ride.

Given this reality, of course the sooner the medallions can be sold the better. But it makes no sense to pull the plug precisely when the New York State Legislature, the New York City Council and maybe, just maybe, NCUA have the opportunity to take a comprehensive approach to dealing with this issue once and for all in a way that stabilizes prices. Let’s see what reasonable heads can agree on before pulling the plug. For instance, a public/private partnership which funds medallion purchases could potentially stabilize prices. What’s the harm of waiting a few more months?

Entry filed under: General. Tags: , , , .

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1 Comment Add your own

  • 1. George Plevretes  |  February 10, 2020 at 4:26 pm

    I strongly agree! This is mostly a credit union mess and we should help in cleaning it up without victimizing the drivers all over again. Work with the City and others. Maybe set a price that allows drivers to eat and make loans they can pay back. Or some other fair settlement. Many of them have few other employment opportunities. This already hurting the credit union movement reputation-let’s not make it any worse.

    Reply

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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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