The investigations come after The New York Times found that thousands of drivers were crushed under debt they could not repay.
The New York attorney general’s office said Monday it had opened an inquiry into more than a decade of lending practices that left thousands of immigrant taxi drivers in crushing debt, while Mayor Bill de Blasio ordered a separate investigation into the brokers who helped arrange the loans.
The efforts marked the government’s first steps toward addressing a crisis that has engulfed the city’s yellow cab industry. They came a day after The New York Times published a two-part investigation revealing that a handful of taxi industry leaders artificially inflated the price of a medallion — the coveted permit that allows a driver to own and operate a cab — and made hundreds of millions of dollars by issuing reckless loans to low-income buyers.
The investigation also found that regulators at every level of government ignored warning signs, and the city fed the frenzy by selling medallions and promoting them in ads as being “better than the stock market.”
The price of a medallion rose to more than $1 million before crashing in late 2014, which left borrowers with debt they had little hope of repaying. More than 950 medallion owners have filed for bankruptcy, and thousands more are struggling to stay afloat.
The findings also drew a quick response from other elected officials. The chairman of the Assembly’s banking committee, Kenneth Zebrowski, a Democrat, said his committee would hold a hearing on the issue; the City Council speaker, Corey Johnson, said he was drafting legislation; and several other officials in New York and Albany called for the government to pressure lenders to soften loan terms.
The biggest threat to the industry leaders appeared to be the inquiry by the attorney general, Letitia James, which will aim to determine if the lenders engaged in any illegal activity. “Our office is beginning an inquiry into the disturbing reports regarding the lending and business practices that may have created the taxi medallion crisis,” an office spokeswoman said in a statement. “These allegations are serious and must be thoroughly scrutinized.”
Gov. Andrew M. Cuomo said through a spokesman that he supported the inquiry. “If any of these businesses or lenders did something wrong, they deserve to be held fully accountable,” the spokesman said in a statement.
Lenders did not respond to requests for comment. Previously, they denied wrongdoing, saying regulators had approved all of their practices and some borrowers had made poor decisions and assumed too much debt. Lenders blamed the crisis on the city for allowing ride-hailing companies like Uber and Lyft to enter without regulation, which they said led medallion values to plummet.
Mr. de Blasio said the city’s investigation will focus on the brokers who arranged the loans for drivers and sometimes lent money themselves.
“The 45-day review will identify and penalize brokers who have taken advantage of buyers and misled city authorities,” the mayor said in a statement. “The review will set down strict new rules that prevent broker practices that hurt hard-working drivers.”
Four of the city’s biggest taxi brokers did not respond to requests for comment.
Bhairavi Desai, founder of the Taxi Workers Alliance, which represents drivers and independent owners, said the city should not get to investigate the business practices because it was complicit in many of them.
The government has already closed or merged all of the nonprofit credit unions that were involved in the industry, saying they participated in “unsafe and unsound banking practices.” At least one credit union leader, Alan Kaufman, the former chief executive of Melrose Credit Union, a major medallion lender, is facing civil charges.
- The investigations come after The New York Times found that thousands of yellow cab-drivers were crushed under debt they could not repay.