New York Credit Unions Appeal Taxi Medallion Ruling
New York credit unions that collectively manage more than $2 billion in taxi medallion loans are appealing a court ruling, which rejected their argument that regulatory treatment of medallion taxicabs violated the equal protection clause under the U.S. Constitution.
The credit unions, which sued the city of New York and its Taxi and Limousine Commission, argued the medallion taxicab industry is required to comply with state regulations. Uber, Lyft, Gett and other mobile app ridesharing services, however, operate without being required to comply with the same regulations. Such disparate treatment violates the equal protection clause under the Fourteenth Amendment of the U.S. Constitution, the credit unions claimed.
In a March 30 ruling, U.S. District Court Judge Alison J. Nathan ruled there was no disparate treatment because a mobile app ridesharing service is not the same as hailing a medallion cab on the street.
“Quite simply, medallion taxicabs are not similarly situated to FHV (for-hire vehicles) because medallion taxicabs…..have, effectively, a collective, government-sanctioned monopoly over one particular form of hailing,” Judge Nathan wrote in her ruling. “Indeed, several courts around the country addressing Equal Protection claims similar to the one at issue here have, in thoughtful and persuasive decisions, relied predominately on the one central fact that taxicabs are on the only vehicles-for-hire available for street hail to deem justified a wide variety of distinctions in the treatment of traditional taxis and application based FHV companies by municipal and statutory and regulatory schemes.”
The lawsuit was originally filed in November 2015 by the $1.7 billion Melrose Credit Union in Briarwood, N.Y., the $591 million Progressive Credit Union in New York City and the $236 million LOMTO Federal Credit Union in Woodside, N.Y., and taxicab industry organizations and individual investors.
From this lawsuit, the credit unions were looking to secure a court-ordered permanent injunction to end New York City’s disparate regulatory treatment of the medallion taxicab industry and unspecified compensatory damages.
The credit unions filed a notice of appeal on April 27 with the U.S. Second Circuit Court of Appeals in New York City. No hearings have been scheduled yet.
Since 2015, the delinquency and charge off rates of taxi medallion loans have soared for Melrose, Progressive and LOMTO because of fierce competition from the mobile app ridesharing services. That competition in turn led to substantial declines in the value of medallions --- tin plaques affixed to yellow cabs giving operators the right to drive a NYC taxi. In 2013 and 2014, some medallions were selling for $1 million or more. But since then, taxi medallion values have declined by 50% and more
Melrose, New York’s tenth largest credit union, was placed into conservatorship in February by the New York State Department of Financial Services, which appointed the NCUA as the conservator. This gives the federal agency the authority to manage Melrose in an effort to resolve its issues and determine it future prospects.
Additionally, LOMTO is undercapitalized with a net worth of 5.87%, according to NCUA financial performance reports.
Montauk Credit Union, which was placed into conservatorship because of its financially troubled taxi medallion loan portfolio, was consolidated in March 2016 with the $6.9 billion Bethpage Federal Credit Union in Bethpage, N.Y.