NEW YORK—State regulators are auditing credit unions here that provide taxi medallion loans.
The moves come at the same time the New York State Department of Financial Services has taken took possession of Montauk Credit Union here, and appointed NCUA as conservator, as CUToday.info reported here.
The state Department of Financial Services is digging through the books of the $2.1-billion Melrose Credit Union, $692-million Progressive Credit Union and the $278-million LOMTO FCU, according to The New York Post.
The majority of Montauk’s lending is in taxi medallion loans. The value of taxi medallion loans in New York—as well as in other cities across the U.S.—has dropped markedly due to ride-sharing services such as Uber.
The threat to the taxi business in New York, as well as to CUs that make medallion loans here, has prompted these taxi medallion CUs to sue the city, alleging Uber is operating illegally. The credit unions recently lost their lawsuit.
Montauk has 2,893 members and assets of $178.5 million, according to the credit union’s most recent Call Report, a very high asset-to-member ratio, reflecting the value of the medallion loans.
Ongoing Inspection
State regulators have been quietly inspecting the records of the credit unions since earlier this month, the Post reported, adding that industry officials now worry about a domino effect leading to more government takeovers or mergers of these taxi medallion credit unions.
NCUA data shows that Montauk delinquencies rose to 2.96% through June, and had been steadily increasing in the past year. In just six months, ROA dropped from 1.09% at the close of 2014 to -2.36% through June. Capital fell from 12.35% at the end of the year to 10.34% by the end of June.
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. 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.
Call Report data shows LOMTO lost $235,573 through June, and delinquencies since June 2014 (0.03%) increased over the next 12 months to 3.68%. Net worth has remained steady, at 16.73% through June.
Appeal Is Expected
The taxi industry is fighting back against the ride-sharing companies, introducing two apps that offer riders with a smartphone a seamless way to hail and pay for a ride in any of the city's 20,000 yellow and green taxis, Crain’s New York Business reported. The apps, Arro and Way2Ride, are backed by the companies that together provide the credit-card and Taxi TV systems in the back of all cabs.
The taxi CUs, as well as other taxi-industry advocates that sued the city over Uber’s practices, are expected to appeal the court ruling.
“In the meantime, however, a catastrophe is unfolding, as an entire industry continues to be illegally destroyed,” Todd Higgins, the lawyer representing the coalition of taxi companies and credit unions, had previously commented.
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