Lawmakers Want to Crackdown on Predatory Lending in Taxi Medallion Industry

Inside Subprime: July 2, 2019

By Jessica Easto

At a recent city council meeting, New York City lawmakers grilled the Taxi and Limousine Commission (TLC) for not doing enough to mitigate the role of predatory lenders in the industry it regulated—the city’s taxi medallion industry—and proposed a set of bills to do just that.

Between 2002 and 2014, the cost of a taxi medallion soared out of control—with one medallion selling for $1.3 million in 2013—before collapsing in recent years due to the popularity of ride-share services, leaving many taxi drivers in the hole. A New York Times report from earlier this year blamed industry leaders—at the complicity of the TLC—for artificially inflating prices and building a highly profitable and “reckless” predatory loan market that targeted taxi drivers, wiped them out financially, and led to several suicides.

Last fall, city council members sent a fifteen-page questionnaire to TLC officials demanding answers related to the TLC’s involvement, but did not receive an adequate response.

“City regulators were asleep at the switch on this issue,” Council Speaker Corey Johnson said in advance of the meeting. “It’s clear that we need to take legislative action to protect medallion owners and drivers from predatory actors including lenders, medallion brokers, and fleet managers.”

Advocates for industry change contend that the TLC knew about the potential consequences of soaring medallion prices and did not do enough to prevent it. A 2011 report commissioned by the city to analyze taxi policy predicted that the bottom would fall out of the taxi medallion loan industry if no actions were taken to stop it. At the city council meeting, acting TLC Commissioner Bill Heinzen claimed that he only saw the report the week before the meeting. Although the city council requested the 2011 report three weeks before the meeting, they only received it three hours before they convened, according to Bronx City Council member Ritchie Torres.

A series of new bills, each sponsored by a different councilmember and designed to protect taxi drivers from predatory lending, were introduced at the meeting.

Torres’s bill proposed to create a TLC department that evaluates the financial stability of the taxi industry. Councilmember and Chair of the Transportation Committee Ydanis Rodriquez’s bill would require TLC to “evaluate the character and integrity of taxicab brokers, agents, and taxicab licensees.” Councilmember Adrienne Adams’s bill would require those seeking a taxi license to disclose their finances and require the TLC to review those disclosures. Lastly, Councilmember Francisco Moya’s bill would require the TLC to review the funds being used to buy or transfer taxi licenses.

“The city had no interest in reining in the market, and breaking up the party because there was money to be made,” said Torres at the meeting. “Drivers who were promised the American dream have been given a nightmare, and the city that sold them that American dream ultimately sold them out.”

Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Florida, Illinois, Chicago, Ohio, Texas, and more.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIn