The question of whether a CUSO can act as a loan broker for loans used to finance the purchase of New York City taxi medallions was recently addressed by the NCUA.
In an Oct. 1 opinion letter, the regulator said it is a permissible activity per the NCUA's CUSO rules. The NCUA responded to a request for clearance regarding a federal credit union that serves New York City taxi owners that formed a CUSO to provide loan services for granting of loans to members buying taxi medallions. The CUSO wants to buy an existing medallion loan broker's business.
The loan broker handles certain loan processing and loan closing activities such as verifying medallion ownership and title, organization of loan-related documents and release of lien filings, but does not fund the loan. The CUSO would submit loan applications from members to CU lenders. In the event of a borrower's default, loan broker may also provide repossession services, which may include locating a buyer for a repossessed medallion.
"In simple, broad terms, a loan broker acts as an intermediary between a borrower and a lender, bringing the parties together. We view the loan broker activity described as permissible under the preapproved category of 'loan support services,'" wrote Hattie Ulan, NCUA associate general counsel.
Ulan reiterated that a CUSO cannot originate or fund a loan for the purchase of a taxicab medallion. The ownership and operation of a yellow medallion taxicab in New York City and the sale and transfer of medallions are subject to various limitations and requirements not addressed in the NCUA opinion letter, she noted.
The yellow medallion taxicab is a well-recognized feature of New York City, the NCUA said. The medallion itself, a metallic symbol attached to the hood of a New York taxicab, is a license regulated by New York City that permits drivers to pick up passengers on the street. The number of medallions is limited, currently to around 13,000, so someone interested in becoming a medallion taxicab driver or owning a medallion must purchase one from a current owner, the NCUA said. The value of a taxicab medallion, depending on whether it is a medallion for an independent owner-operator or a corporate medallion, ranges from more than $500,000 for an owner-operator to more than $700,000 for a corporate one. A medallion can be transferred to a buyer meeting New York City qualifications, and it can serve as security for a loan.
Several California credit unions recently partnered with the San Francisco Municipal Transportation Agency to launch a taxi medallion sales pilot program to revamp a nearly 35-year-old system that aims to bring several millions of dollars each year to the city's coffers, train cab drivers to run their businesses better and ease downtown congestion. The credit unions provided the fund processing for the taxi medallion sales.