NY Assn. President Asks NCUA to Be Flexible With Taxi Drivers; Cites Reputational Risk

Citing the reputational risk the industry faces, New York Credit Union Association is asking the NCUA to be as flexible as possible in dealing with taxi drivers burdened with loans they cannot repay.

“We respect and appreciate the agency’s need to protect the Share Insurance Fund from losses, but we worry about the long-term reputational damage to credit unions that may result from reports that suggest an unwillingness to work with borrowers,” association President/CEO William Mellin said.

He cited news stories that said the agency was among the least flexible loan holders of taxi-related loans.

That claim was echoed by New York City Mayor Bill De Blasio, whose office conducted a review of the taxi loan debacle earlier this year.

That report stated that a driver survey found that “credit unions taken over by the NCUA are often the least willing to work with drivers struggling to afford their monthly loan payments.”

The New York City taxi industry has been devastated by ride-sharing companies such as Uber and Lyft. When the industry was thriving, many drivers and medallion owners were encouraged to take out huge loans using their medallions as collateral.

The New York Times investigated the taxi loan industry and the newspaper reported that many of the drivers were immigrants who may not have understood the terms of the loans.

Two credit unions with large concentrations of taxi loans, Melrose Federal Credit Union and LOMTO Credit Union were liquidated by the NCUA and merged into another credit union, Teachers Federal Credit Union.

But as part of the merger, that credit union did not assume control of taxi loans, leaving the NCUA with those loans. The agency reported that last year, the failure of those credit unions cost the Share Insurance Fund more than $700 million.

Mellin said New York City credit unions are doing their part to “right the ship,” adding that some credit unions inherited taxi loans and are trying to work with borrowers,

“By restructuring these loans to make them more affordable for borrowers, these credit unions are protecting their own capital position, and potentially the Share Insurance Fund,” he said, in his letter to Hood. “These credit unions are also attempting to protect their hard-earned reputation by proving that they are ready, willing and able to be a part of the solution to the medallion crisis.”

Mellin said that as the taxi industry continues to struggle, news stories about the plight of individual drivers will continue to be published.

Hood has not responded to Mellin’s letter, association officials said.

However, in a response to a letter from Rep. Alexandria Ocasio-Cortez (D-N.Y.), Hood repeated his comments about the agency working with borrowers.

“The agency is committed to balancing the needs of the borrowers with the congressionally mandated requirement for maintaining safety and soundness of credit unions and the share insurance fund,” he wrote.

The NCUA’s asset management division is managing the loans from Melrose and LOMTO.

“There is no one-size-fits-all approach to resolving these challenges, just as there is no single borrower type in the taxi medallion market,” he said.

Efforts to work with borrowers “are complicated by the fluctuating value of collateral used to secure the loans and, in some cases, the high level of cash-out refinancing activity that took place on individual loans,” he continued.