For Medallion Loans Things Just Get Worse and Worse

November 13, 2020 at 12:36 pm Leave a comment

Yesterday, New York City Comptroller Scott Stringer endorsed a plan by Taxi Workers Alliance proposal to help stabilize the prices of taxi medallions in New York City.  Under the proposal:

 “…lenders [would] write down outstanding loans to a maximum of $125,000, allowing medallion owners to repay loans on terms they can afford with current earnings. Under this agreement, the City would act as a backstop for medallion loans held by individual owners. After reviewing the proposal, the Comptroller’s Office has concluded that it offers a comprehensive risk management approach that could reduce future liability and costs for taxpayers.”

Unfortunately, this proposal is being put forward at a time when the prospects for the medallion industry in New York City continue to dim even more.

Similar frameworks have been proposed in the past only to be overtaken by economic reality.  Most notably, in February NCUA was criticized for agreeing to sell the medallion loans it was servicing to Marblegate Asset Management LLC, even as a task force which included representatives of the credit union industry was putting the finishing touches on its own plan to stabilize medallion prices.  But had NCUA not sold these loans, the financial impact on the industry could have been catastrophic.  Remember, this controversy was taking place before anyone knew that a pandemic was about to shut down The City.

To get a sense of just how badly the pandemic further crippled the taxi industry, a blog reader recently sent me a press release from Medallion Financial Corp.  Medallion Financial Corp is a publicly traded lender which is involved with a broad range of loans.  In its third quarter financial report it announced that it has impaired all of its medallions loans and established loan loss reserves at the collateral value, net of liquidation costs, which for the New York City market declined from $119,500 as of June 30, 2020 to $90,300 as of September 30, 2020.  Furthermore, it also stressed that the situation remains highly uncertain.

Entry filed under: COVID-19, 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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