The Taxicab Service Association, an association of credit unionlenders that finance yellow taxi medallions, has filed a lawsuitclaiming a New York law violates a state constitution mandate thatprohibits the state and mayor from interfering in the regulation ofthe local tax industry.

Filed Friday in the New York State Supreme Court, the suit seeksto invalidate the HAIL Act, a 2011 statute involving Mayor MichaelBloomberg's plan to create a new class of up to 18,000 liveriesauthorized to pick up street hails in Brooklyn, Queens, the Bronx,Staten Island and much of Manhattan.

Taxi medallions are licenses that allow for the ownership andoperation of a taxi.

The taxicab service association said HAIL is in directcompetition with the New York's yellow cabs and it authorizes themayor alone to flood the market with 2,000 new yellow cabmedallions.

The group is also claiming that HAIL will devalue yellow taximedallions and potentially trigger a credit crisis for the $5billion medallion lending industry. According to the suit, themayor's

Taxi and Limousine Commission has illegally begun to implementthe act without a proper review of the potential impact of 18,000street hail livery vehicles on the city's air and noise quality,traffic congestion, and neighborhood character.

The lawsuit alleged that New York has pocketed hundreds ofmillions of dollars through yellow cab medallion auctions by makingrepresentations of yellow cab street hail exclusivity, and thatmedallion lenders' and owners' investments are now at risk ofmassive devaluation as a direct and foreseeable result of themayor's borough street hail program.

The lawsuit seeks a declaration that the HAIL Act is illegal,and an injunction to prevent its implementation.

Several credit unions offer financing for taxi medallions and have managed to build niche portfolios withthe loans.

In 2010, the NCUA issued an opinion letter stating that a CUSOcan act as a loan broker for loans used to finance the purchase ofNew York City taxi medallions.