Taxi medallion loans continue to drag down credit unions.
In another blow to credit unions burdened by taxi medallion loans, a federal appeals court has ruled that city of New York rules that treat taxicabs and rider-sharing companies differently are not unconstitutional.
Three credit unions—Progressive Credit Union, Melrose Credit Union and LOMTO Federal Credit Union–taxi companies and taxi owners had unsuccessfully challenged the rules in federal court. Progressive and taxi cab companies and drivers appealed the ruling.
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The Second Circuit Court of Appeals this week upheld the lower court ruling.
The NCUA has taken control of several credit unions that lost millions having invested in the taxi medallions. Taxi companies are heavily regulated by the New York city, while ride-sharing companies are not.
The taxi companies and credit unions argue that with the increased competition from ride-sharing companies, the value of taxi medallions has plunged.
Melrose had taxi medallion loan delinquencies of about $32,000 in January 2014, according to documents filed in federal court. As of May 31, 2015, those delinquencies had skyrocketed to $167.2 million. By June 30 of that same year, the delinquencies had reached almost $202.7 million.
Progressive and the other plaintiffs argued that the city violated the Equal Protection Clause of the Constitution by placing different regulatory burdens on ride-sharing companies and taxicabs.
The appeals court said it recognized that city rules have devastated the taxi companies.
"We readily acknowledge that the plaintiffs may have suffered a decrease in the value of their medallions as a consequence of regulations imposed by the [taxi commission]," the appeals court said. "But this decrease is not something that violates the Due Process Clause."
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