City vows to crack down on predatory taxi medallion brokers

Following an investigation into medallion brokers, the city
recommended new regulations

As NYC taxi drivers continue to
face crippling amounts of debt
, the city released the results
of an investigation that further confirm predatory practices in the
industry and proposes new rules to mitigate them.

“If you’re a cab driver in New York City, know we’re in
your corner and that this is just a start,” Mayor Bill de Blasio
said in a statement about the recently released report.

A recent
two-part New York Times investigation
found that industry
leaders artificially increased the price of taxi medallions,
leading to a collapse in 2014, and the value of medallions to
dramatically decrease. This also led 950 medallion owners to file
for bankruptcy and thousands to struggle financially.

city’s investigation
says that 51 percent of drivers stated
that “they are struggling to pay their monthly bills” and 26
percent are considering bankruptcy.

The average median debt for taxi drivers surveyed for the city
investigation is approximately $500,000, while the average hourly
wage rate for taxi drivers in the state is $16.57/hour, according
to the Bureau of Labor Statistics.

The Times investigation found that among bankers, investors, and
debt collectors; brokers who assisted in the buying or selling of
taxi medallions made millions in profits. This prompted the de
Blasio administration to conduct an investigation into their
business practices.

“Although brokers were heavily involved in helping their
clients secure lending for the purchase of a medallion, very few
reported that their broker helped them understand the terms of the
loans,” the report reads.

The 45-day investigation by the Taxi Limousine Commission (TLC),
the Department of Finance (DOF), and the Department of Consumer and
Worker Protection (DCWP), looked into TLC-licensed businesses that
act as brokers to facilitate purchases of taxi medallions.
According to the report, 90 percent of drivers surveyed said they
used a broker to purchase their medallions.

The report, released on Monday morning, found that even though
the TLC requires brokers to summarize the loan and purchase
agreement terms to lenders, the information provided to taxi
drivers is “often confusing” and not provided in any languages
other than English, though over 95 percent of taxi drivers are
immigrants. The investigation also found that brokers don’t use
written broker agreements consistently.

As a result, the city made several recommendations,

  • Amending TLC rules to make sure that “brokers act in the
    interests of their clients,” regularly report their interests in
    businesses serving TLC licensees, and submit written agreements to
    TLC for all the services provided as brokers.
  • Requiring brokers to provide an easy-to-read loan disclosure
    statement for their clients—translated into the city’s top 10
    non-English languages—summarizing the total amount borrowed,
    monthly payments and interest rates, cost to pay off the loan, and
    the amount of time required to pay it off.
  • Forming a new Business Practices Accountability Unit under the
    TLC to make sure brokers follow the new rules.
  • Creating a list of enforcement actions against brokers on the
    TLC website as well as “plain language medallion transfer
    guide” to allow for buying or selling a medallion without
    requiring a broker’s services.
  • Establishing a Driver’s Assistance Center, offering mental
    health resources and access to financial advocacy.

But advocates for city taxi drivers say these recommendations
are not enough.

“The mayor’s recommendations don’t include debt
forgiveness for a workforce facing an economic crisis that has
already pushed three owner-drivers to suicide, and thousands to
bankruptcy,” Bhairavi Desai, executive director of the New York
Taxi Workers Alliance (NYTWA), said in a statement.

Desai added that debt forgiveness for struggling taxi drivers
would cost between $1.8 billion and $2.7 billion—and not $13
billion as City Hall has
reportedly estimated.
The city recently agreed on
waiving $10 million in fees
owed by medallion owners and a
group of City Council members and the city’s Comptroller
have spoken in favor of a partial bailout.

Source: FS – All – Real Estate News 1
City vows to crack down on predatory taxi medallion brokers