A union representing New York City’s beleaguered taxi drivers is seeking “mission-driven” credit unions and banks to purchase and refinance loans that drivers remain unable to pay.
“The Medallion Debt Acquisition Fund is a tremendous opportunity for social-justice oriented lenders who are looking to expand and have a high-profile impact in one of the most iconic industries in New York City,” the New York Taxi Workers Alliance said, in describing the plan.
The union said that six lenders are seeking to sell loans that they now hold. Those lenders include the National Credit Union Administration, which holds a limited number of loans, an agency spokesman confirmed. For those loans, the NCUA spokesman said, the agency is working with individual owners to work out repayment plans.
The bailout plan is the latest twist in the long-standing taxi medallion loan crisis. Many drivers took out loans from credit unions and banks, using their taxi medallions as collateral. As ride-sharing services grew in popularity, many of those drivers have been unable to repay their loans and simultaneously their medallions dropped in value. The coronavirus crisis exacerbated the problem since many people who normally work and travel in the city worked from home.
The medallion crisis led to the failure of at least two credit unions—Melrose Credit Union and LOMTO Federal Credit Union. That left the NCUA holding taxi loans from those institutions. Several city officials attempted to cobble together a private-public partnership to purchase the loans. However, before that group was formed, the NCUA sold the loans to Marblegate Asset Management, a private equity fund.
Since then, the New York Taxi Workers Alliance has been seeking help for the debt-laden drivers.
Their current plan calls for credit unions or banks—or an individual financial institution—to establish a $115 million fund to purchase loans for an average purchase price of $115,000. Loans would be refinanced at terms that are profitable for lenders, while still allowing drivers to support themselves. The loans would have a 4% interest rate. The program would have a government “backstop,” that would guarantee repayment. That, the New York Taxi Workers Alliance said, would eliminate any risk for lenders.
New York City officials recently announced a $65 million program to restructure medallion loans. “This Program will give small medallion owners a critical tool to work with lenders and take charge of their debt by restructuring loans, reducing principal, and lowering monthly payments,” the city’s Taxi and Limousine Commission said, in announcing the program in March. “This $20,000 can mean hundreds of thousands of dollars off your loan principal,” the commission said, in encouraging drivers to participate.
However, the taxi workers alliance has panned the city program, calling it inadequate.