I must admit that until recently I really didn’t know anything about taxi cab medallions. I was born in Alabama and grew up in Montgomery where on the rare occasion you might see a taxi coming or going from the airport….if you were on that side of town! Over the years, I’ve visited New York on occasion where taxi cabs are literally at your fingertips 24 hours a day but, until the last few years, I did not have an understanding of the inner workings of the industry.
I’ve learned that each yellow cab in New York City is a “medallion taxi” and are able to pick up passengers in all 5 boroughs. With a reported 13,000 medallions, New York City has the largest taxi cab industry. The medallions are, in essence, licenses once revered as a status symbol that you had made it in America! Typically, it was expensive to get one and some drivers have passed them down through generations as they held high value. So much value, that lending institutions loan money against the equity of the medallions.
Cost of Medallions Plummets
There has been a growing problem and controversy involving the ride hailing apps such as Uber and Lyft taking revenue from licensed taxi cabs. This has culminated in the value of the taxi cab medallions being greatly reduced. A recent CNBC article reports that three New York credit unions that specialize in loaning money against these medallions have been placed into conservatorship due to the plummeting value of the medallions. In the article, one credit union analyst, Keith Leggett, compares this situation to the subprime loan crisis.
Just a few years ago, medallions were being sold for up to $1.3 million dollars. The value of the medallions have now been reduced to half of that or less as more people patronize Uber and Lyft as opposed to hailing a taxi cab. Some medallions are owned by large organizations with fleets of cabs but those aren’t the ones who are really suffering. Many individual taxi drivers have worked brutal hours after scraping up the funds or borrowing funds to purchase their medallion for hundreds of thousands of dollars. Some have made a practice of borrowing from the equity in the medallions in order to fund things like a home and health care. Now with the reduction in taxi cab patrons, these folks are facing foreclosure on their medallions, homes and other things.
The default on the loans by the drivers have been the direct cause of the lenders problems. Many taxi drivers have held onto the medallions as a retirement plan, hoping to sell them for a substantial price. These drivers who are now at retirement age, may find themselves unable to retire and, even worse, in substantial debt. According to the CNBC article, many do not think that the industry will recover and the medallions will never hold the value they did in the past. Personally, this reminds me of the 80’s when “big box” stores moved into small town America and put the Mom and Pop grocers out of business. Unfortunately for the cab drivers, this is the ebb and flow of a capitalistic society or some would call it progression.
This goes to show that anyone or any entity can find themselves in a financial crisis. If you are in such a crisis, don’t be afraid or embarrassed to seek help. Please reach out to our office nearest you for a free consultation with an attorney who can help you get relief from your financial stress.