NYC Toughens Rules for Granting Taxi Licenses to Curb Abuse

(Bloomberg) -- New York City companies that finance the purchase of taxi medallions will be required to prepare written documents for all transactions and disclose conflicts of interests when brokers also act as lenders, after an investigation of the industry uncovered abuses.

More than half of the city’s taxi drivers surveyed say they’re struggling to pay monthly bills and 26% are considering bankruptcy, unable to make a living with too much competition among for-hire-vehicles, according to a report into the industry commissioned by Mayor Bill de Blasio. The mayor’s report contains no recommendations for city-aided bail outs of loans that drivers now say they can’t pay, fueling criticism that it fails to adequately address the financial crisis many cabbies are contending with.

Because city-sponsored medallion sales in the past decade helped fuel an artificially inflated market, the city has a responsibility to help solve the problem, several City Council members said during hearings last month.

The value of medallions crashed with the advent of tens of thousands of competing app-based for-hire vehicles since 2014. At least nine drivers have committed suicide in the past two years as the economic crisis has worsened, including one who shot himself outside City Hall’s front gate last year.

“The mayor’s report and recommendations on the medallion predatory lending scandal fall short,” Bhairavi Desai, executive director of the New York Taxi Workers Alliance. “What we need right now is more than a report on what city rules have been violated -- we need an immediate end to the financial devastation that drivers are facing.”

Desai said the mayor’s office “grossly miscalculates” the cost of refinancing loans and forgiving medallion debt, placing it at about $13 billion. Her organization estimates it at no more than $2.7 billion.

The city’s report found that brokers failed to provide written agreements explaining terms of their relationships with either buyers or sellers of medallions in more than half the instances reviewed and recommended that documents be clearly written and available in all transactions. It also called for establishing a “driver’s assistance center” offering financial advice and mental health counseling. Investigations into predatory medallion lending practices will continue, the mayor’s office said.

“We’ll be able to do even more to help taxi drivers too long taken advantage of by those they trusted for guidance and help,” said de Blasio, who is also running for the Democratic presidential nomination. “If you’re a cab driver in New York City, know we’re in your corner and that this is just a start. We will never stop looking for ways to help.”

To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, William Selway, Michael B. Marois

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