Comptroller Stringer Announces Support for New York Taxi Workers Alliance Proposal for Medallion Debt Relief

 

Taxi Workers Alliance proposal offers strategic and comprehensive roadmap to relieve crushing debt, resolve non-performing loans, and save taxpayer money

Following the tragic deaths of nine drivers in one twelve-month period, plan calls for City to act as backstop for medallion loans held by individual owners

Stringer: Predatory lenders took drivers for a ride and left families in a wreckage of financial distress and despair. We have a fiscal and moral obligation to make this right—and embracing this plan is a start.

 New York City Comptroller Scott M. Stringer announced support for a breakthrough proposal released by the New York Taxi Workers Alliance (NYTWA) to address the taxi medallion crisis that has led to widespread financial devastation among drivers whose medallion values plummeted. NYTWA’s plan calls on lenders to write down outstanding loans to a maximum of $125,000, allowing medallion owners to repay loans on terms they can afford with current earnings. Under this agreement, the City would act as a backstop for medallion loans held by individual owners. After reviewing the proposal, the Comptroller’s Office has concluded that it offers a comprehensive risk management approach that could reduce future liability and costs for taxpayers.

“For decades, driving a cab in New York City was a road to the middle class for immigrants from around the world. But today, the medallion that once promised prosperity and stability is now a financial sinkhole. The taxi medallion crisis is a test of our commitment to fighting poverty and preserving pathways to the American Dream,” said New York City Comptroller Scott M. Stringer. “This breakthrough proposal from the Taxi Workers Alliance offers a responsible and necessary approach to relieve crushing debt for drivers and reduce ballooning costs for taxpayers. Predatory lenders took drivers for a ride and left families in a wreckage of financial distress and despair. We have a fiscal and moral obligation to make this right—and embracing this plan is a start. My office has vetted the proposal from the New York Taxi Workers Alliance and found it fiscally sound.”

In the early 2000s, many taxi medallion owners took out loans to purchase medallions at inflated prices that were driven upward by predatory lenders. The advent of app-based for-hire companies like Uber and Lyft further upended this market and popped the speculative bubble, leading to a sharp decline in driver incomes and the value of medallions. The resulting economic catastrophe led nine drivers to commit suicide in a twelve-month period, underscoring the urgent need for action. With the added economic stress brought by the COVID-19 pandemic, even more medallion owners are struggling and unable to afford rent and groceries, let alone their monthly loan payments – which exceed their earnings in some cases. Due to the medallion market collapse, owners across the city are now underwater and their loan balances exceed the market value of their medallions. Yellow cabs, in particular, are impacted by economic downturn in Manhattan and the airports, both of which they rely on for the majority of their fares. Without immediate attention to this crisis, the yellow cab sector will face massive foreclosures and bankruptcies, worsening the economic instability in our city.

NY Taxi Workers Alliance proposal presents strategic roadmap to solve the medallion crisis

• The plan recognizes that lenders are holding non-performing loans that are often not worth their face value.
• The proposal calls for lenders to write down outstanding loans to a maximum of $125,000, allowing medallion owners to repay loans on terms they can afford, with interest rates capped at 4 percent and monthly payments at less than $800.
• The plan proposes the City act as a backstop to put a floor under loan losses by guaranteeing purchase of any medallions that borrowers default on, to facilitate this step by lenders. With this approach, the City would take possession of the medallion and be able to sell it to recoup all or part of its cost.
• As a package, this proposal represents a sound risk-management alternative to the current status quo.

The City backstop would benefit all parties—medallion owners, lenders, and City taxpayers

• The proposal would ensure medallion owners would have manageable, affordable loan payments and be free of the threat of financial ruin for themselves and their families.
• Lenders would have certainty about the value of their medallion loan portfolios and be able to reflect an accurate valuation on their own balance sheets.
• The City’s exposure would be limited and the threat of possible larger liability could be removed or reduced.