Congress of the Huited States ‘Washington, BC 20515 July 25,2019 ‘The Honorable Jerome H. Powell ‘The Honorable Jelena MeWilliams Chairman Chairwoman Board of Governors of Federal Deposit Insurance Corporation the Federal Reserve System ‘550 17 Street, NW 20" Street & Constitution Avenue, NW Washington, DC 20429 ‘Washington, DC 20851 ‘The Honorable Joseph M. Oting ‘The Honorable Rodney E. Hood Comptroller ofthe Currency Chaiernan Office of the Comptroller of National Credit Union Administration the Currency 177 Duke Street 400 71h St SW Alexandria, VA 22314 ‘Washington, DC 20219 Dear Chairman Powell, Chairman McWilliams, Comptroller Oting, and Chairman Hood: ‘We are writing to express our strong concems about how regulators have exercised their supervision of federally-insured banks and credit unions engaging, diecty or indirectly, in taxi ‘medallion lending in the New York City metropolitan area, As you are aware, media reports have described how predatory business practices ruined the livlinoods of many taxi drivers in the region while generating large profits for financial institutions under your supervision, 3s well as brokers, leet owners and debt collectors." Like many other taxi drivers, Mohammad Hogue, a hardworking New Yorker and immigrant, ‘emptied his savings to buy a taxi medallion so he could provide for his wife and children, Me. Hoque, who made $30,000 annually, signed a contract for approximately $1 million that eventually would require him to owe the unbelievable amount of $1.7 million due to fees and interest. Due tothe lack of clear disclosures, Mr. Hoque said he was unaware until much later that the $50,000 he paid upfront was only for taxes.? In ther instances, enders extended loan terms and created contacts that lasted as long as 50 years, while others offered interest-only products with exorbitant fees and required borrowers to Forfeit their legal rights. Some industry leaders artificially inflated the value of medallions by purposefully overpaying for them to extract more in fees and interest on these loans before the "See eg, Bran M, Rosenthal, “They were Comed”: How Reckless Loans Devasated a Generation of Tax Drivers New York Times (May 19,2019), toe nines con/20 1909 9m yesin hylan ‘ules For example, ener sed conesions of jademen tha forced ai drivers to enqush ee it © india proceedings in the event fda. These lenders were thn able wo cll money fem bank scours, ‘lk some seiingmedalions and reselling them for profit while al stil charging te oigielborowers oes and Sa‘market collapsed. In addition, several large banks allzgedly worked through powerful industry players, coordinating with large fleet owners and brokers that used the banks’ money to make medallion loans. Owners and brokers received a cut of the monthly payments and sometimes an additional fee for this scheme? A few eredit unions tht engaged in extensive taxi medallion lending filed efter the value of medallions collased* Due to these predstory lending practices, taxi rivers lost their entre savings and were eft with an insurmountable debt asthe arificilly- inflated value of medallions crashed.® What makes this all the more troubling is that regulators appeared to be aware of risky lending practices years earlier. For instance, examiners at the New “York Deparunent uf Financial Services noticed w poeta! uarhet bubble and warned agains. these practices starting in 20108 (On June 11,2019, twas announced that the New York Taxi and Limousine Commission will no Tonger elect the biennial $1,100 license renewal fe from the city's 9,384 yellow cab medallion owners.” Additionally the New York City Council unveiled a package of bills aimed at extending his shor-etm rele, with the goal of preventing this from happening again* Meanwhile, Federal egulatrs appear tobe slow to ke corrective measures. For example, catlier this year, the Office of the Inspector General published its report onthe causes ofthe failures of Melrose Credit Union, LOMTO Federal Credit Union and Bay Ridge Credit Union, all located in New York The epor found that thes credit unions failed because they had a massive concentration of loans collateralized by overvalued taxi medallion, they exhibited tnsafe and unsound lending practices, they had insufficient management oversight, andthe did not have adequate risk management practices. Funbermore leaders ofthese and other eredit unions became multimilionaies while taxi drivers suffered. However, the NCUA has only nounced plans to completely implement the Inspeior General's recommendations by December 31,2020, abou a year anda half from now, leaving borrowers vulnerable to similar predatory behavior unless NCUA and other appropri regulators act with more urgency inthis mater. Collectively, your agencies have the important responsibility to ensure that banks and credit unions are operating ina safe and sound manner and are not engaging in, or otherwise aiding and abetting in, predatory schemes when making loans to individuals, ike these taxi drivers. Proper oversight is especially important given that many ofthe taxi drivers are new to these types of complex financial and legal agreements. Therefore, iis important Congress learn ota “See eg. Jim DaPlessis, "NCUA Closes Second Creit Union With Taxi Mdalion Loans.” Credit Union Time: 172018), hursdfsew cuimgs conv nctslous-nrtnion thai Sia * See Bran M. Rosen, “As Thousands of Tai Driers Wer Trapped in Loans, Top Oficist Coun he Money.” New York Times, (May 19,2019), hips www: aytinescon/201908/Siayepontax/-medallons ba "Sea Glen Gass, "NYC oficial get do S1OM in txt medion ees” Daily News (June 1, 2019), psd sans comen: Yorn: mali 6 2019061) ildksinlculztoccomesor al See Bran M. Rosen, "Pacing Rui, Taxi Drivers o Get $10 Mlhon Break and Loan Safeguards" New York ‘Times, (ne 12 2019), un sis con/ 3100 nexnsaye xtc * Office ofthe inspector General, Mater Lose Review of Melrose Credit Union, Lomio Federal Credit Unen, Bay Ridge Feral Cred Union” (Mr, 29,2019), pis sun os) marl ‘sviewsmarch2019 5°what steps, any, you have taken to date to improve supervision of entities you regulate that operate in the taxi medallion industry, as well as to ensure that affected taxi drivers who received predatory loans are remediated, To that end, we request that you provide a written response by August 30 detailing (1) to what extent entities you regulate were involved, directly or indirectly in providing taxi ‘medallion loans, including whether any of these entities coordinated with feet owners and brokers to provide these loans; (2) whether, and to what extent, your agency is enhancing supervisory and enforcement procedures to ensure entities you regulte that are engaged in taxi medallion lending are sufficiently analyzing the bility of borrowers to repay loans and that loan terms are properly disclosed; (3) whether, and to what extent, your ageney has coordinated with each other and with law-enforcement agencies, such as the New York State Office ofthe ‘Atiomey General, to better protect taxi drivers and similarly situated individuals who are treated 43s corporations instead of consumers; (4) whether, and to what extent, your agency has previded Joan modifications, repayment plans, orbearances, or loan forgiveness options to affected taxi drivers, and/or encouraged your regulated entities to provide the same for affected taxi drivers: and (5) whether you believe that there are gaps in regulatory oversight or Fundamental protections lacking tha should be addressed to better protect taxi drivers and similarly situated individuals [New York City sees approximately 300,000 daily average trips from medallion taxis, providing an essential mode of transit for the region. Like moch of the country, New York City vas built by hardworking women and men like Mi. Hoque, and these callous predatory actions by dishonest lenders hurt everyone in our society. With more than 10,000 hardworking taxi drivers operating in New York City, these workers provide the foundation upon which the city’s economy depends and area vital coatributor to the transportation system of the region, These workers deserve better from their government, 0 we lock forward to your prompt respons: 10 this important mater. PE ‘Alexandria Ocasio-Ce Sincerely, ‘Adriano Gspaillat “Member of Congress “Member of Congress {yda M. Veldequer utr Clarke “Member of Congress “Member of Congress ¥ See 2018 Far Book, NYC Taxi & Limousine Commission. tus se gvlssshiidovaloaded2OL8 i ibookena eos ee Thee ee be Serrano < ‘Meng. ber of Congress ‘of Congress Hakeem 4 ‘Menber of Congress.