NAFCU Again Endorses NCUA Taxi Loan Sale
While the sale helps the NCUA, NYC officials are still trying to help drivers who had loans from Melrose CU and LOMTO FCU.
NAFCU on Thursday praised the NCUA for earlier this year selling the taxi medallions it held, saying that the sale helped bolster the agency Share Insurance Fund when that boost was needed.
But New York officials are still struggling with the aftermath of that decision, as they continue to try to assist taxi drivers who were burdened with large loans they could not afford.
“As NAFCU’s SIF Committee pointed out prior to the sale the unusually large taxi medallion portfolio would strain agency resources and pose a risk to the credit union community so long as it remained under management by [the Asset Management and Assistance Center],” NAFCU Chief Economist and Vice President of Research Curt Long told the NCUA board during the agency’s annual budget hearing.
“While NAFCU did not anticipate a global pandemic at the time we offered this advice, we believed that retaining the portfolio in the hopes of extracting a higher sales price presented unnecessary risks, and recommended that the agency divest the portfolio at the earliest opportunity so long as it received a fair price,” he added.
The sale may have helped the NCUA, but city officials are still trying to develop a plan to help drivers who took out large loans from financial institutions, including Melrose Credit Union and LOMTO Federal Credit Union. As the taxi business faced competition with ride-sharing services, the taxi business plunged and many of those loans went into default, leading to the failure of those credit unions.
The NCUA was left holding the loans and sold them to Marblegate Asset Management, a private equity fund. City officials had been trying to cobble together a public-private partnership to purchase the loans, but the agency sold them before that group could be formed.
The New York Taxi Workers Alliance has developed a bailout proposal, which has been endorsed by New York Attorney General Letitia James and New York City Comptroller Scott Stringer.
The union’s plan calls on all lenders still holding taxi loans to lower them to a maximum of $125,000, with an interest rate set at 4%. The maximum loan payment would be under 8% and the city would serve as the guarantor.
“Predatory lenders took drivers for a ride and left families in a wreckage of financial distress and despair,” Stringer said. “We have a fiscal and moral obligation to make this right — and embracing this plan is a start. My office has vetted the proposal from the New York Taxi Workers Alliance and found it fiscally sound.”
James also said she supports the plan. “Hardworking taxi medallion individual and owner-drivers entered this industry believing the city would run a fair system,” she said. “Instead, many of these workers and small business owners were sent down a rabbit hole of financial ruin.”