NEW YORK—What to do next is the question on the mind of Robert Familant, CEO of Progressive CU here, following a New York City judge’s ruling on Wednesday against three lawsuits filed by his credit union and others that alleged Uber is operating illegally in the city.
The $692-million Progressive is one of four credit unions that make taxi medallion loans that joined together in suing the city over Uber’s operations. The others are $2.1-billion Melrose CU, $174-million Montauk Credit Union, and $278-million LOMTO FCU.
The CUs had alleged that the city has allowed Uber to illegally pick up “street-hail” passengers. The emergence of Uber, along with fellow ride-sharing service Lyft, has caused the value the taxi medallions for which the credit unions make loans to plummet.
“Obviously we are disappointed,” said Familant about the ruling. “And I am not an attorney, so I am not the right person to interpret the judge’s decision in dismissing our lawsuit and whether he missed the point. But I am told by others who are attorneys that (the judge’s reason behind the decision) seems to be a very weak argument and kind of misses the points we made.
“This decision is new, it happened only Wednesday,” continued Familant. “The group will convene and come up with our next strategy. Is that appealing? I am not sure. And it may be premature to say we will appeal. But it is the obvious next step. The city would appeal had we won.”
CUs Argument On Point
Familant said he felt the credit unions’ lawsuit was thoughtful and on point, and that the judge failed to address the concerns raised in the suit.
In dismissing the suits, Queens Judge Allan Weiss stated that Yellow and Green cab medallions are not “a shield against the rapid technological advances of the modern world.”
The idea that the medallions would protect the struggling industry against app-based car services was unreasonable, Judge Weiss said.
“In this day and age, even with public utilities, investors must always be wary of new forms of competition arising from technological developments,” Weiss wrote in his ruling. “Passenger communications to Uber-type companies via a smartphone are not street hails, which are requests made by passengers standing on the street who gesture or make an utterance.”
Ride sharing services threaten the future of the taxi industry in New York, along with the future of credit unions that make loans for the medallions. In a previous hearing, lawyers argued that the value of medallions in this city had dropped 40%.
Delinquencies Leveling Off
Delinquencies at Progressive have leveled off at 1.04%, but capital has remained extremely strong and stable in the past year, ending June at 39.94%. Delinquencies are down at Progressive from just over 2% at the end of the year.
But the situation is not as good at Melrose CU, where delinquencies and troubled debt increased 25% over the two-month period ended July 31. Capital stood at 18.04% through June.
As CUToday.info has reported previously, the value of taxi medallions has steadily declined as the prevalence of “ride-sharing” services such as Uber and Lyft has grown.
According to Crain’s New York Business, delinquent and troubled debt at Melrose is now approximately $400 million, which is nearly equal to the capital of the $2.1-billion Melrose CU.
Melrose CU’s June 30 5300 reports approximately $206-million in reportable delinquencies, the bulk of which is 60-179 days delinquent. Over that same time period, values on taxi medallions in New York have been consistently sinking as more consumers use Uber and Lyft. Melrose also reported $158 million in troubled debt restructured loans. More than three-quarters of Melrose CU’s loan portfolio is made up of taxi medallion loans.
Through June, according to Call Report data, delinquencies for the other two taxi medallion CUs that are part of the lawsuit are 2.96% for Montauk and 3.68% for LOMTO. Capital at LOMTO is 16.73% and 10.34% at Montauk.
Despite the current troubles, Familant believes taxi medallion values will eventually level out.
“Is this the demise of the taxi industry? I don’t think so,” said Familant. “I hear that a number of Uber drivers are unhappy, that there are too many of them, and some are coming back to driving Yellow cabs where they know they will make money.”
Indeed, Familant is predicting the price of medallions will rebound.
“Medallions have definitely taken a hit, and the values may never come back to the all-time highs. And you know, that would be just fine,” said Familant. “The price of something does not have to go back to its highest point ever.”
Familant said medallion prices before Uber were based on income stream and scarcity, noting that very few medallions are sold and that they are still not being sold.
“Today that value is based on that income stream and fear,” he said. “But the income stream remains. Now it may be diminished in certain operational capacities—if you are driving you are still doing just fine. But if you have a small or large fleet you are not benefitting like you did over the last eight years because right now you have more drivers than you need. You have overcapacity so your income is down slightly.”
Focused On Members
Familant does not see the situation facing taxi medallion CUs and their members who drive cabs as dire.
“There will be people who will struggle, people who over financed,” he said. “Just like in the real estate market, anyone who over financed when an asset class retrenches will struggle, but not everyone.”
Familant said he could not forecast at what point the problems with Uber and medallion values will stabilize, but said his focus lies with his members.
“This situation is not about the credit unions here, it is about our members,” said Familant. “It’s about that guy who bought a medallion and the city telling him there are rules that have been in effect for 50 years. You buy a medallion and here are the rules. And then the city changes the rules on that person. Now the government has essentially deregulated him by allowing unregulated completion into his marketplace.”