Facing Ruin, Taxi Drivers to Get $10 Million Break and Loan Safeguards

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For more than a decade, the New York City agency that oversees the taxi industry stood by while thousands of cabdrivers became mired in reckless loans that saddled them with debt they could not afford and helped lead to a near-collapse of the industry.

On Wednesday, Corey Johnson, the speaker of the City Council, is expected to unveil a package of bills aimed at preventing that from happening again. The Council, responding to an investigation in The New York Times, also plans to hold a hearing later this month to examine the city’s role in a crisis that devastated a generation of cabbies.

At the same time, Mayor Bill de Blasio is set to announce a separate set of initiatives: Drivers will not have to pay a total of $10 million in fees this year and will be able to obtain financial counseling from a new “driver assistance center,” according to people familiar with the plans.

The mayor, a Democrat who is running for president, is also going to reiterate that he supports extending the city moratorium on approving new vehicles from ride-hailing services such as Uber and Lyft, the people said.

None of the efforts will rescue the thousands of taxi drivers who are still struggling with deep debt. Still, officials described the efforts as important first steps.

“It’s clear that we need to take legislative action to protect medallion owners and drivers from predatory actors, including lenders, medallion brokers and fleet managers,” said Mr. Johnson, a Democrat.

The actions come after The Times’s two-part investigation revealed that taxi industry leaders had created a financial bubble in the market for medallions, the coveted permits that allow drivers to own and operate their own cabs.

[Read Part 1 of The Times’s investigation: “How Reckless Loans Devastated a Generation of Taxi Drivers.” Here is Part 2: “As Thousands of Taxi Drivers Were Trapped in Loans, Top Officials Counted the Money.”]

In practices similar to those in the housing market bubble, the taxi industry leaders helped to artificially inflate medallion prices to $1 million in 2014 from $200,000 in 2002, and made hundreds of millions of dollars by channeling about 4,000 purchasers into loans that many could not afford.

The investigation also found regulators ignored internal warnings from staff members, while the city went even further, selling taxi medallions and running ads promoting them as “better than the stock market.”

When the bubble burst and prices crashed in late 2014, the government largely abandoned cabbies; more than 950 have filed for bankruptcy and thousands more struggle to survive, The Times found.

The city Taxi and Limousine Commission, which regulates yellow cabs, declined to comment on the Council’s plan. Agency officials have previously said that they did not have the power to regulate lending practices and that they could not have foreseen that Uber and Lyft would emerge to undercut the industry.

Lenders, which included small, nonprofit credit unions and big banks, denied wrongdoing, saying regulators approved their practices. They also blamed Uber and Lyft for the crisis.

The day after the investigation, New York Attorney General Letitia James opened an inquiry into the lending practices, and Mr. de Blasio ordered an investigation of medallion brokers. Those reviews are still pending.

In Albany, the articles in The Times have also led to renewed interest in three pieces of long-stalled legislation that would address protections for business loans.

One of the bills would improve disclosure rules for those types of loans, while another would outlaw deceptive business practices. A third would ban confessions of judgment, documents in which borrowers admit defaulting on a loan — even before taking out any money — and authorize a bank to do whatever it wants to collect.

Proponents are hoping to pass the bills before the legislative session ends later this month, although none have yet been passed by a full chamber of the Legislature.

“Well, we have to give everything we’ve got for the next two weeks,” said Assemblywoman Yuh-Line Niou of Manhattan, a sponsor of two of the bills.

The City Council legislation is being spearheaded by Mr. Johnson, the speaker, as well as Councilman Ritchie Torres of the Bronx, who leads the Council’s oversight and investigations committee. That committee will hold a joint hearing with the Council’s transportation committee on June 24, officials said.

“I look forward to questioning the Taxi and Limousine Commission about its role in the crisis,” Mr. Torres said. “Not only did it fail to protect medallion owners from predatory forces, it was one of the predatory forces. There’s a sense in which the T.L.C. was a speculator masquerading as a regulator.”

One of the measures requires officials with the T.L.C. to scrutinize the financial resources of medallion buyers and block sales to purchasers who would have to take on unaffordable loans, according to drafts of the proposed bills obtained by The Times. As part of that provision, it would ban the use of confessions of judgment in medallion loans.

The legislation would also direct the T.L.C. to create an Office of Financial Stability to monitor the health of the industry, collect disclosures from medallion owners and assess the integrity of medallion brokers and fleet owners.

Several members of the Council said they supported the legislation but wanted the city to find a way to bail out the owners already in debt. Three councilmen — Mark Levine, Stephen Levin and Brad Lander, all Democrats — said they were researching a bill to do that.

A spokeswoman for the mayor said he was supportive of Mr. Torres’s legislation. She declined to comment on the mayor’s proposals.

The “driver assistance center,” which was first proposed by the Council last year but was never created, would connect cabbies with counseling and food stamps and other benefits, according to the people familiar with the plans.

The fee waiver would aid all owners of the city’s 13,000 taxi medallions, including large fleets, who operate about half of cabs. It would exempt each from paying $1,100 license renewal fees, at least this year, the people said. The Council is already pushing to make the waiver permanent.

Bhairavi Desai, the leader of the Taxi Workers Alliance, which represents individual medallion owners as well as fleet drivers, said she appreciated the efforts. But she urged the city to take more drastic action, such as bailing out drivers already deeply in debt, or pressuring banks to soften loan terms.

“We need to do much more,” she said. “There’s a recognition that it will take some time to get there. But that process needs to begin immediately.”

Ms. Desai said the group had resorted to setting up fund-raising pages for the public to donate to some of the drivers affected by the crisis.

Mr. de Blasio has previously said he supports extending the cap on ride-hailing vehicles such as Uber and Lyft, which was approved last August. On Wednesday, he is expected to reiterate that position and release a study on the impact of the policy so far.

A spokeswoman for Uber, Alix Anfang, criticized the proposal. “The mayor’s cap will create another medallion system, the same kind that bankrupted drivers and enriched lenders,” Ms. Anfang said.

Emma G. Fitzsimmons contributed reporting.

Brian M. Rosenthal is an investigative reporter on the Metro Desk. Previously, he covered state government for the Houston Chronicle and for The Seattle Times. @brianmrosenthal

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