Taxi Officials Are Grilled Over Lending Crisis: ‘This Is a Moral Outrage’

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The New York City Council excoriated the city officials who oversee the taxi industry on Monday, blaming them for a financial crisis that has ruined drivers and releasing a document that lawmakers said showed the officials knew for years that a disaster was looming.

The document, a memo written by a city employee in late 2010 or early 2011, described how the price of the city permit that allows a driver to own their cab — called a medallion — had skyrocketed to unsustainable levels. It also warned that in order to buy the permit, some drivers were taking out loans they could not afford.

A few years after the memo was written, the reckless loans helped cause medallion prices to crash, leaving thousands of immigrant drivers deeply in debt.

The New York Times first revealed the existence of the memo last month in an investigation on the crisis in the industry, but the city had refused to release it, claiming it did not exist.

On Monday, it became a key talking point in an emotional hearing at City Hall. The City Council’s oversight and transportation committees sharply questioned the leaders of the city Taxi and Limousine Commission about the Times’s findings.

Councilman Ritchie Torres, a Bronx Democrat who leads the oversight committee, said the investigation and newly obtained records showed that city officials turned a blind eye to artificial inflation of medallion prices and predatory lending practices because they were focused on making money by selling overpriced medallions for up to $1 million apiece.

“The collapse of the medallion market, properly understood, should be remembered as one of the greatest government scandals in the history of New York City,” Mr. Torres said in his opening statement. “The medallion market collapse is a cautionary tale of what happens when both government and markets are governed not by laws but by greed.”

Taxi industry leaders have denied wrongdoing, saying regulators approved their practices. They have blamed the crisis on unforeseen competition from ride-hailing companies like Uber and Lyft.

The outgoing acting leader of the city taxi commission, Bill Heinzen, apologized to a group of several dozen cabbies who attended the hearing and testified about their financial difficulties. But he insisted the city was not as responsible as the lenders and the banking regulators who supervised them.

“I accept responsibility for what the T.L.C. has done, for what I have done, to make this crisis worse,” Mr. Heinzen said. “I have tried to explain today my belief that other people are also responsible.”

Mr. Heinzen deflected the Council’s questions about the memo, saying that he was not leading the commission when it was written.

The hearing marked the first time that city officials have acknowledged the city’s role in the financial crisis, which has rocked the industry amid a series of suicides by drivers. It also was the first time city lawmakers have asked commission officials about their oversight failures.

The Times investigation found that a handful of taxi industry leaders artificially inflated medallion prices and made hundreds of millions of dollars by channeling immigrant buyers into reckless loans. Prices rose to $1 million in 2014 from $200,000 in 2002, while lenders adopted tactics similar to those in the housing crash, issuing loans with exploitative terms to low-income drivers who could not afford them.

After the bubble burst and medallion prices crashed starting in late 2014, more than 950 medallion owners filed for bankruptcy. Thousands more are struggling to survive.

In the weeks since The Times investigation, the state attorney general has opened an inquiry into the lending practices; the mayor has launched an investigation of the brokers who arranged medallion loans; and the city has agreed to waive up to $10 million in fees owed by taxi drivers and to establish a driver assistance center to help struggling cabbies.

Several members of the City Council also have proposed four pieces of legislation to strengthen regulations and to attempt to stop a medallion bubble from happening again. Monday’s hearing was scheduled in part to discuss those bills, but it quickly turned into a heated interrogation.

Mr. Torres set up a projector and posted images of advertisements that the city had produced when it was selling medallions at auctions. In one, the city said medallions were “better than the stock market.” In another, it said medallions were a path to a “worry-free retirement.”

“Was that misleading?” Mr. Torres asked.

Mr. Heinzen repeatedly declined to answer questions.

“I can’t speak to the past,” he said. He joined the commission in 2015.

Councilman Ydanis Rodriguez, a Manhattan Democrat who leads the transportation committee, asked about the city’s enforcement actions against unscrupulous brokers, leading Mr. Heinzen to acknowledge the city had not revoked the license of any brokers in recent history.

“This is a moral outrage,” said Mr. Rodriguez, who pledged to hold many more hearings on the issue. “We need to fix it now.”

The taxi drivers in attendance echoed similar themes in testimonies. Some of the drivers were allowed to testify before the city officials, and they used their time to share horror stories about their loans and struggles.

One driver, Mouhamadou Aliyu, said he emigrated from the Ivory Coast to New York in 1993, started driving a taxi and eventually bought a medallion. Now, he said, he is $700,000 in debt.

Mr. Aliyu said he contemplated suicide every day.

“What’s happening in the industry is not American,” he said. “It’s not New York. I can even say it’s not humane. It’s brutal.”

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