After the medallion market collapsed, Mayor Bill de Blasio opted not to fund a bailout, and earlier this year, the City Council speaker, Corey Johnson, shut down the committee overseeing the taxi industry, saying it had completed most of its work.
Over 10 months, The Times interviewed 450 people, built a database of every medallion sale since 1995 and reviewed thousands of individual loans and other documents, including internal bank records and confidential profit-sharing agreements.
The investigation found example after example of drivers trapped in exploitative loans, including hundreds who signed interest-only loans that required them to pay exorbitant fees, forfeit their legal rights and give up almost all their monthly income, indefinitely.
A Pakistani immigrant who thought he was just buying a car ended up with a $780,000 medallion loan that left him unable to pay rent. A Bangladeshi immigrant said he was told to lie about his income on his loan application; he eventually lost his medallion. A Haitian immigrant who worked to exhaustion to make his monthly payments discovered he had been paying only interest and went bankrupt.
Abdur Rahim, who is from Bangladesh, is one of several cab drivers who allege they were duped into signing exploitative loans.
It is unclear if the practices violated any laws. But after reviewing The Times’s findings, experts said the methods were among the worst that have been used since the housing crash.
“I don’t think I could concoct a more predatory scheme if I tried,” said Roger Bertling, the senior instructor at Harvard Law School’s clinic on predatory lending and consumer protection. “This was modern-day indentured servitude.”
Lenders developed their techniques in New York but spread them to Chicago, Boston, San Francisco and elsewhere, transforming taxi industries across the United States.
In interviews, lenders denied wrongdoing. They noted that regulators approved their practices, and said some borrowers made poor decisions and assumed too much debt. They said some drivers were happy to use climbing medallion values as collateral to take out cash, and that those who sold their medallions at the height of the market made money.
The lenders said they believed medallion values would keep increasing, as they almost always had. No one, they said, could have predicted Uber and Lyft would emerge to undercut the business.
“People love to blame banks for things that happen because they’re big bad banks,” said Robert Familant, the former head of Progressive Credit Union, a small nonprofit that specialized in medallion loans. “We didn’t do anything, in my opinion, other than try to help small businesspeople become successful.”
Mr. Familant made about $30 million in salary and deferred payouts during the bubble, including $4.8 million in bonuses and incentives in 2014, the year it burst, according to disclosure forms.
Meera Joshi, who joined the Taxi and Limousine Commission in 2011 and became chairwoman in 2014, said it was not the city’s job to regulate lending. But she acknowledged that officials saw red flags and could have done something. “There were lots of players, and lots of people just watched it happen. So the T.L.C. watched it happen. The lenders watched it happen. The borrowers watched it happen as their investment went up, and it wasn’t until it started falling apart that people started taking action and pointing fingers,” said Ms. Joshi, who left the commission in March. “It was a party. Why stop it?”
Every day, about 250,000 people hail a New York City yellow taxi. Most probably do not know they are participating in an unconventional economic system about as old as the Empire State Building. The city created taxi medallions in 1937.
Unlicensed cabs crowded city streets, so officials designed about 12,000 specialized tin plates and made it illegal to operate a taxi without one bolted to the hood of the car. The city sold each medallion for $10.
People who bought medallions could sell them, just like any other asset. The only restriction: Officials designated roughly half as “independent medallions” and eventually required that those always be owned by whoever was driving that cab.
Over time, as yellow taxis became symbols of New York, a cutthroat industry grew around them. A few entrepreneurs obtained most of the nonindependent medallions and built fleets that controlled the market. They were family operations largely based in the industrial neighborhoods of Hell’s Kitchen in Manhattan and Long Island City in Queens.
Allegations of corruption, racism and exploitation dogged the industry. Some fleet bosses were accused of cheating drivers. Some drivers refused to go outside Manhattan or pick up black and Latino passengers. Fleet drivers typically worked 60 hours a week, made less than minimum wage and received no benefits, according to city studies.
Still, driving could serve as a path to the middle class. Drivers could save to buy an independent medallion, which would increase their earnings and give them an asset they could someday sell for a retirement nest egg.
Those who borrowed money to buy a medallion typically had to submit a large down payment and repay within five to 10 years.
The conservative lending strategy produced modest returns. The city did not release new medallions for almost 60 years, and values slowly climbed, hitting $100,000 in 1985 and $200,000 in 1997.
“It was a safe and stable asset, and it provided a good life for those of us who were lucky enough to buy them,” said Guy Roberts, who began driving in 1979 and eventually bought medallions and formed a fleet. “Not an easy life, but a good life.”
“And then,” he said, “everything changed.”
- “It wasn’t until it started falling apart that people started taking action and pointing fingers,” said Ms. Joshi, who left the TLC in March. “It was a party. Why stop it?”