NEW YORK—Credit unions that make taxi medallion loans in New York City were dealt a tough blow Wednesday when a city judge ruled against three lawsuits that alleged Uber is operating illegally in the Big Apple.
The lawsuits, filed by a group of taxi medallion CUs, medallion owners, and taxi companies against the city of New York, alleged that the city has allowed Uber to illegally pick up street-hail passengers.
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, he noted.
“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%.
The $2.1-billion Melrose CU, the $174-million Montauk Credit Union, $718-million Progressive Credit Union and $278-million LOMTO FCU joined together in one of the lawsuits that was dismissed.
Melrose Delinquencies Sharply Rise
Delinquencies and troubled debt increased 25% over the two-month period ended July 31 at Melrose CU, which primarily makes loans for New York taxi medallions.
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.
MCU reported $371,420 in net income through the second quarter.
Crain’s New York Business reported that Melrose Credit Union stated in a letter to the city’s chief lawyer late last month that 471 of its taxi loans will mature in the next six months, and if borrowers can’t make $212 million in balloon payments, the credit union may have to foreclose and sell the medallions for whatever it can.
Taxi-industry advocates are expected to appeal the ruling, the New York Post reported.
“An e-hail is a hail, and no amount of distortion, misdirection or mischief will change that,” Todd Higgins, the lawyer representing the coalition of taxi companies and credit unions, told the Post.
“In the meantime, however, a catastrophe is unfolding, as an entire industry continues to be illegally destroyed,” he said.