NEW YORK–Federal prosecutors in Manhattan have opened an investigation into possible lending fraud in the New York City taxi industry, and a number of now-defunct credit unions are expected to be involved.
As CUToday.info has reported, loans for taxi medallions left many borrowers overwhelmed in debt even as the value of those medallions was crashing, while lenders initially saw big profits and executives made millions in pay and bonuses. Both the City of New York and prosecutors had pledged to investigate following an extensive report by the New York Times, as CUToday.info reported here.
More than 950 drivers have filed for bankruptcy, and a number of other drivers/borrowers have committed suicide.
Now, according to the Times, prosecutors are investigating potential crimes that include bank, wire or mail fraud. The investigation is being conducted by the United States Attorney’s Office for the Southern District of New York. New York’s attorney general, Letitia James, is also conducting an inquiry.
“I told them everything,” Mohammed Hoque, 48, one of two drivers who said they were interviewed by federal agents and whose debt was so overwhelming he lost his medallion, told the New York Times. “I hope they help us.”
Hoque, an immigrant from Bangladesh, bought a medallion for $1.7 million in 2014, even though is income was about $30,000. He said he drove 12 hours a day, six days a week, but could not keep up with his payments.
Not Fluent in English
“Many of the more than 4,000 cabdrivers who bought medallions in that period were low-income immigrants who did not speak English fluently and signed interest-only loans or other lopsided agreements,” the Times reported.
The investigation reportedly is also looking into how the New York City officials contributed to the problem by selling medallions at auctions and by running advertisements that stated the permits were “better than the stock market.”
The medallion bubble burst in 2014, in part due to ride-sharing services.
As CUToday.info has reported, the failed taxi medallion loan CUs have cost the National Credit Union Insurance Fund nearly three-quarters of a billion dollars. The failed CUs include Melrose CU, Progressive CU and LOMTO CU.