NEW YORK–New York Attorney General Letitia James has filed a formal claim against New York City seeking $810 million, alleging the city’s taxi regulator played a critical role in inflating the value of taxi medallions.
James’ demand came on the same day all three members of the NCUA board sought to explain to representatives of New York City’s taxi medallion owners why the agency had sold its portfolio of taxi medallion loans less than 18 hours earlier, as CUToday.info reported here.
In filing the action, James said the city “made hundreds of millions of dollars marketing and auctioning thousands of medallions while helping to keep values artificially high” noted the Wall Street Journal.
As CUToday.info has reported, numerous borrowers took out loans for medallions that at one point were valued at more than $1 million. But the value of that collateral has since plummeted to less than $200,000, and countless borrowers have declared bankruptcy, walked away from the loans, and even committed suicide.
The plunge in values led to the demise of approximately a half-dozen credit unions at a cost to the National Credit Union Share Insurance Fund of approximately three-quarters of a billion dollars.
‘Frivolous Claim’
There are about 13,500 such medallions in New York City, according to the city’s Taxi and Limousine Commision.
A spokesperson for Mayor Bill de Blasio, Freddi Goldstein, said that since Mr. de Blasio took office, in 2014, the city had tried to help drivers and curb the spread of ride-hailing companies such as Uber and Lyft, the Journal reported. Goldstein called James’ demands “frivolous.”
James said she has given notice she plans to sue the city if it doesn’t meet her demands within 30 days. Any funds received would pay for restitution and damages to medallion owners, James said, according to the Wall Street Journal.
According to James, the Taxi and Limousine Commission set an artificial floor for prices and allowed brokers to inflate and collude on pricing. At the same time, she said, the regulator marketed medallions as a solid investment with returns better than the stock market, the Journal reported.
James alleged that as early as 2011 the regulator knew values were artificially high but failed to warn buyers, and that the city made more money than it should have on medallion sales and transfers because of the artificially inflated prices.
Former NCUA Board Member Responds
Former NCUA Board Member and Chairman Rick Metsger said he supports the New York attorney general’s action.
“I applaud the New York attorney general for recognizing the role the City of New York played in radically inflating taxi medallions prices and taking advantage of unsuspecting owner/drivers,” said Metsger. “The order is equivalent to the approximately $800 million dollars the city profited from this activity. There is plenty of blame to go around for the distress caused by the taxi medallions crisis. It is just that the City of New York, which created the medallion asset and then artificially inflated its value to fill city coffers, be called to account for its role in creating the bubble and the pain that has since afflicted so many.”