Garnet Capital Advisors Blog

Archived news

October 15, 2018

Taxi Medallion Woes Continue: How to Mitigate Your Losses Before Trouble Strikes


Banks and credit unions who have outstanding New York City taxi medallion loans are suffering due to the drops in the price of taxi medallions in the wake of disruption from ride-hailing apps such as Uber and Lyft. Many of these financial institutions have closed or been acquired. 


Banks and credit unions with New York City taxi medallion loans outstanding continue to be hard hit by the disruption in the taxi industry that began in 2013 with the advent of ride-hailing apps from Uber and then Lyft. 

Taxi medallions were once worth as much as $1 million and now sell for less than $200,000.

Value of Medallions Plummets

At one point, taxi medallions in New York City, which confer the right to drive a cab, were worth more than $1 million. They now sell for less than $200,000, and many of them have gone into foreclosure. Lending institutions at their peak tended to see New York City taxi medallions as nearly risk-free loans, and the medallion-holders had virtual membership in a regulatory closed ecosystem. The New York City Taxi & Limousine Commission regulated the medallions. 

But the rise of ride-hailing apps spelled the end of any closed shop on New York City streets, because they spelled the end of taxis being the primary method of getting around by private car.

The impact of falling medallion prices, foreclosures, and presumably falling taxicab wages have been felt by banks and credit unions throughout New York City. 

Many taxi drivers are underwater on their medallion loans.

Lomto Federal Credit Union, in Queens, New York, was recently acquired by Teachers Federal Credit Union. It’s the sixth credit union failure this year, according to American Banker. Lomto, with $156 million in assets, suffered significant losses in taxi medallion loans. Teachers Federal Credit Union also acquired Melrose Credit Union, another institution floundering under the impact of bad taxi medallion loans, a month before. Melrose’s total exposure to taxi medallions at the time of acquisition was listed at slightly more than $833 million, versus $1.24 billion of total assets in June 2017.

Signature Bank, Medallion Financial, and First Jersey Credit Union have also reported losses from medallion loans.

Like mortgage holders when home prices drop, medallion holders who bought when medallions were selling for high prices may now be underwater on their loans, owing more on medallion loans that they could recoup by selling the medallions.

Some observers believe that the resulting financial strain is contributing to a relatively high number of taxi driver suicides.

How a Whole Loan Broker Can Help Disruption-Impacted Institutions

The disruption of the taxi industry has led banks and credit unions in the taxi medallion loan business to take large losses. Some have closed or been liquidated. 

The whole loan brokers at Garnet Capital can help lenders mitigate losses in non- and sub-performing portfolios before they become forces driving the entire institution into default. Remember the adage "your first loss is often your best loss." Moving quickly on bad news is often the best bet for financial institutions exposed to bad or underwater loans. 

Taxis, of course, are not the only business subject to stress or disruption. Garnet can both help sellers maximize the price in a compliant sale and conduct the sale in a transparent manner that should appease all stakeholders.

Browse white papers at Garnet Capital today.