The Taxicab Service Association, an association of credit union lenders that finance yellow taxi medallions, has filed a lawsuit claiming a New York law violates a state constitution mandate that prohibits the state and mayor from interfering in the regulation of the local tax industry.

Filed Friday in the New York State Supreme Court, the suit seeks to invalidate the HAIL Act, a 2011 statute involving Mayor Michael Bloomberg's plan to create a new class of up to 18,000 liveries authorized 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 and operation of a taxi.

The taxicab service association said HAIL is in direct competition with the New York's yellow cabs and it authorizes the mayor alone to flood the market with 2,000 new yellow cab medallions.

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

Taxi and Limousine Commission has illegally begun to implement the act without a proper review of the potential impact of 18,000 street 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 of millions of dollars through yellow cab medallion auctions by making representations of yellow cab street hail exclusivity, and that medallion lenders' and owners' investments are now at risk of massive devaluation as a direct and foreseeable result of the mayor'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 with the loans.

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