San Francisco Says It’s Not Responsible for Taxi Loans Made by Credit Union
The credit union argues that the San Francisco Municipal Transit Agency violated terms of a public-private partnership.
San Francisco city officials said this month that they have no obligation to pay the San Francisco Federal Credit Union millions of dollars as a result of taxi medallion loans that have remained unpaid.
Responding to a lawsuit filed by the $1 billion credit union last year, the San Francisco Municipal Transit Agency said, “it did not guarantee the value or profitability of transferable medallions, the continued demand of medallions, or [the agency’s] ability to retransfer foreclosed medallions.”
The credit union has argued that the agency violated terms of a public-private partnership that was supposed to protect the credit unions in case of defaulted loans.
San Francisco is one of several cities that has seen its taxi industry falter as a result of the growth in ride-sharing companies such as Uber and Lyft.
Taxi medallion owners have been defaulting on loans, leaving credit unions that offered large numbers of medallion loans in serious financial trouble. In the most celebrated cases, Melrose Federal Credit Union and LOMTO Credit Union failed; the credit union that took over the institutions did not accept any of the troubled taxi loans.
That left those loans in the hands of the NCUA, cost the Share Insurance Fund more than $700 million last year.
San Francisco’s taxi business also is in trouble and a consultant hired by the city reported that city officials needed to make large regulatory changes to help prop up the industry.
“Without a change in the operation of the industry, medallion loans may continue to be foreclosed,” the consultants warned in the May 2018 report.
In 2009, according to the San Francisco Federal Credit Union suit, city officials decided they could raise revenue by selling transferable taxi medallions to taxi drivers; in the past those medallions were issued by the city for free.
City officials set a purchase price of $250,000 and asked the credit union to help drivers purchase the medallions through loans. The credit union has argued that the transportation agency agreed to set a price floor of $250,000 and to work to retransfer foreclosed medallions.
However, as the taxi business faltered the city has not resold medallions and the program folded.
Responding to the suit, the city said it never guaranteed the value of the medallions in the face of new competition.
The last transferable medallion sale took place in April 2016 and in the summer of 2016, the credit union began foreclosing on some of the loans.
But it is not the city’s responsibility to help the credit union, city officials said.
“As a matter of law, the Credit Union can present no evidence that SFMTA breached any statutory or contractual obligation,” they said, in responding to the lawsuit.