Cab Drivers Are Drowning in Debt. The City’s Plan Won’t Help.

This article is published in our Perspectives section. Wen Zhuang is a member of the Debt Collective and organizer with NYC-DSA’s Debt & Finance Working Group.

“I’m a very talkative person and I love the way the city moves. That’s why I’ve been driving a cab since the ‘90s,” Balkar Singh told me as we sat in a circle of chairs with other cab drivers on the West corner of City Hall Park, just past 11 pm this past Sunday.

A line of yellow cabs were keeping the lights on in Civic Center, as they’ve done for decades in this city. That night, instead of vehicles for transport, the cabs were symbols of protest, as drivers prepared to pass the first night of a 24/7 picket.

For years, after profiting from a speculative bubble in medallion values, New York City has refused to help struggling taxi cab drivers, permitting banks and hedge funds to lock them into predatory loans while also allowing unregulated e-hail services to flood the streets. Drivers who had to borrow hundreds of thousands of dollars to purchase taxi medallions now face insurmountable debts, and the COVID-19 pandemic has pushed many of them into bankruptcy.

In response, the city’s Taxi and Limousine Commission (TLC) has finally proposed a relief plan, which will theoretically allow drivers to refinance their loans on better terms. Although the TLC has publicly promoted the relief program’s apparent impact, a legal services attorney familiar with the program warned New York Focus that its success has been greatly exaggerated, and a union representing cab drivers has demanded that the TLC adopt more favorable terms. (A spokesperson for the TLC did not respond to requests for comment.)

“We’ve always been honest workers, paying on time, even when it was difficult and impossible at times,” said Singh.

Singh and other drivers are calling on the TLC to adopt a plan that includes provisions laid out by the New York Taxi Workers Alliance (NYTWA), a union representing over 20,000 drivers. NYTWA’s drivers and allies plan to camp out in City Hall Park every day, to demand that the TLC meet their demands in a public hearing scheduled for Monday. If not, they’ll go on hunger strike.

Explaining the extreme measures, Singh pointed to the City Hall steps, where cab driver Doug Schiffer had shot himself in 2018, hoping it would be a wake-up call for politicians not to let cab drivers go extinct. At the time of his death, Schiffer was working up to 120 hours a week. He was one of eight drivers to kill themselves between November 2017 and November 2018.

Drivers served the city. The city deceived them.  

The taxi medallion system, when it was created by the city in 1937, in effect gave birth to a new form of private property: medallions can be bought and sold, leased, used as collateral for loans, and count as assets in bankruptcy.

Between 1990 and 2016, drivers couldn't own medallions if they didn't also drive the taxicab the medallion was affixed to, causing a substantial portion of the 13,587 New York City taxicab medallions in existence to be owned by “owner-drivers.” Virtually all of these owner-drivers—largely working-class immigrants from South Asia, Haiti and Ecuador—took out loans, secured by monthly payments generated through operating the cab, in order to finance the purchase of their medallions.

A survey conducted in 2019 showed that medallion owner-drivers owe a median amount of $499,000, even as the market value of a medallion has collapsed from over $1 million in 2014 to approximately $80,000 today.

That crash is a direct result of the city’s policies.

During the Bloomberg administration, to help make up a budget shortfall in 2002, the city created over a thousand new medallions and put them up for auction.

To raise more money, the city took a series of steps to artificially inflate the value of medallions by over 500%: setting increasingly higher minimum bid amounts at auctions; setting a 5% interest rate on medallions transferred in the open market, discouraging drivers to sell on the secondary market below the minimum bid amount at auctions; ignoring collusive bidding at auctions; and manipulating public price data.

By the time medallions were valued at over $1 million, the city had made about $855 million. About 4,000 taxi drivers purchased medallions during this time, while others used newfound equity in their medallions to finance their first homes. Now, insurmountable debt leaves many of them at risk of losing those homes.

“The commissioner has shown no remorse. She tells us that we have homes, so we should be able to pay,” Singh said, “but everyone wants to own a home, everyone wants to reach their 60s and retire with some sense of dignity.”

Ahead of the auctions, as medallion prices were rapidly inflating, the TLC heavily promoted the opportunity to own one, calling it a “once-in-a-lifetime opportunity.” It placed ads in  television, radio, newspapers and newsletters calling medallions a “once-in-a-lifetime-opportunity”, and held special seminars portraying medallions as “a chance at the American Dream” and “collateral that can assist in home financing, college tuition or even ‘worry-free’ retirement.”

In 2004, the Taxi and Limousine Commission published this "Special Medallion Sale Issue" of the TLC Times newsletter.

The TLC continued to artificially pump up medallion values, including by publishing misleading medallion sales data, for years—even after Gary Roth, a TLC policy analyst, circulated an internal memorandum in 2010 warning that prices of medallions have “outstripped the underlying value of the asset.”

In 2011, as the price of a medallion reached approximately $685,000, City Hall began allowing e-hail apps like Uber and Lyft unfettered access to the city’s for-hire transportation market. By the time it temporarily halted the issuance of new e-hail licenses in 2019, it had granted over 100,000 of them. Yellow taxicab revenues dropped more than 30% between 2011 and 2019, and medallions substantially depreciated in value. By 2019, more than 950 medallion owners had filed for bankruptcy.

The costs of operating a taxicab in addition to the medallion loan payments themselves—including vehicle loans, commercial automobile insurance, gas, vehicle maintenance, and credit card processing fees—are substantial. Even prior to the pandemic, medallion-owners generated gross revenues of approximately $5,000 each month and carried median monthly payments over $2,000. As a result, the typical driver worked 60 hours or more a week while making poverty wages. The pandemic caused a severe decrease in ridership and revenue, making a bad situation worse.

Today, those who have managed to hold on to their medallions are hounded by hedge funds and banks who have made a long-term investment in ruthlessly exploiting the situation of owner-drivers.

After medallion prices crashed, many of the original lenders of medallion loans were shut down by the federal government, which then liquidated thousands of loans in fire sales to Connecticut-based “vulture investment” firm Marblegate. Other lenders, such as Signature Bank, sought to divest their medallion loan portfolios. Signature sold about 60% of its portfolio at similar bargain prices to Minnesota-based hedge fund OSK.

“It’s not a relief. It’s an ambush”  

In March, the TLC finally released plans to bring relief to drivers. But NYTWA views the de Blasio administration’s proposed $65 million relief program as deeply inadequate and designed to bail out hedge funds, not drivers. The city has agreed to pay $20,000 for all qualified applications in the form of a grant to medallion lenders, so long as the lender agrees to forgive a certain percentage of the owner’s loan. Additionally, drivers may qualify for up to an additional $9,000 based on hardship. Assuming every participant in the Program receives the full $29,000, the $65 million would be distributed to little more than 2,000 drivers.

But even on its own terms, the program will only work if lenders agree to participate.

According to Bhairavi Desai, Executive Director of NYTWA, only a single lender, Marblegate, has made restructuring offers to members that would qualify for the TLC grant under the proposed rules. And the offer is hardly generous.

For borrowers who owe around $400,000 or more in principal, Marblegate has indicated it is willing to lower the principal to $275,000 in exchange for the $20,000 offered by the city and $1,500 in upfront legal fees from the borrower. The restructured loans would carry a 5% interest rate and a monthly payment around $1,600, with an amortization period of 25 years. For the many drivers who are in their 50s and 60s and making a gross monthly income of around $4,000 in non-pandemic times, this means they’d die before paying off their  debt.

The drivers picketing in City Hall Park find the TLC’s promotion of the new relief program as deceptive as the commission’s earlier promotion of medallions. “It’s not a relief. It’s an ambush,” Singh said.

As part of the relief program, the TLC began operating a city-funded program called the Owner-Driver Resource Center to refer drivers seeking legal services to the non-profit New York Legal Assistance Group (NYLAG).

Last month, the TLC claimed that the Owner-Driver Resource Center had worked with “more than 700 medallion owners and a dozen different lenders on renegotiating loans.” The commission stated that lenders have actively participated in the process, offering restructuring and forgiveness terms that agreed with TLC’s proposed rules.

Randal Wilhite does not believe it.

“These claims are patently false,” he told New York Focus.

Wilhite would know. He is a legal services attorney at NYLAG, who was part of the Owner-Driver Resource Center and represented several medallion owner-drivers. Upon discovering that Wilhite was actively supporting medallion owner-drivers outside of work who were critical of the program, the city threatened to pull NYLAG’s funding unless Wilhite was immediately removed from representing clients in the program, and NYLAG obliged. (After this article was published, NYLAG disabled Wilhite's email and suspended him from all legal services work.)

Randal Wilhite, an attorney with the New York Legal Assistance Group, worked with struggling medallion owners through the city-funded Owner-Driver Resource Center.

Wilhite believes that the TLC is exaggerating the program’s success when it claims that over 700 medallion owners have worked with the Owner-Driver Resource Center to renegotiate their loans. It is true that more than 700 medallion owners have scheduled appointments for legal services, he said, but only a small minority of them have been able to start active loan negotiations. In many cases, “their lender isn’t interested, they otherwise don’t qualify for the program, NYLAG hasn’t gotten to their case yet, or they need help with something other than negotiating medallion loans,” he said.

According to Wilhite, after the TLC announced the relief program in March, it began soliciting large numbers of medallion owner-drivers to make appointments with NYLAG, telling them that NYLAG’s attorneys could use the $20,000 to negotiate hundreds of thousands of dollars in debt relief on behalf of the desperate owner-drivers.

“The reality is that only two lenders have made any specific commitments to participate in the program, and only for a portion of their portfolios,” Wilhite said. “Most industry lenders aren’t interested in providing 20%, 30%, 40% forgiveness for only $20,000. The idea that they would be is kind of silly on its face.”

On Saturday, the day before protests were to start, the TLC released a statement claiming that three medallion owners have already had $700,000 in debt written off. But many, including former leaders of the TLC, have questioned these claims, pointing out the irrelevance of these numbers if the number of medallions and the amount owed remains unknown. And because the loan transactions are made between banks and individual owners, it’s impossible to know what relief the program will actually bring.

“They’re trying to do whatever they can to convince the public the program is sound,” Wilhite said, “but I know that it can’t meet my clients’ needs.”

A fiscally sound fight 

In January 2020, after months of study and unprecedented collaboration among industry stakeholders, the City Council’s Taxi Medallion Task Force made its key recommendation to address the medallion debt crisis: the city, in collaboration with other government and private partners, should establish a $500 to $600 million fund to buy back outstanding medallion loans and refinance them on less exploitative terms.

At the time, the De Blasio administration claimed to be supportive of the idea, as long as most of the money wouldn’t come from the city. But one month later, it failed to act. Instead of being liquidated, thousands of medallion loans originated through now-defunct credit unions were sold again to Marblegate for approximately $300 million total.

Viewed against what was once understood to be necessary to resolve the crisis, NYTWA’s current demands are remarkably modest. They ask the city to do the same thing it's already doing—making down payments to lenders who agree to refinance the loans—but with better, clearer terms.

The union wants the city to pay $30,000 down on any medallion loan that a lender agrees to refinance at a principal amount of no more than $145,000, with a monthly payment of no more than $800. It also wants the city to agree to guarantee any loans refinanced on these terms—in other words, committing to pay it off if the owner-driver defaults—which could induce more lenders to participate in the program.

New York City Comptroller Scott Stringer has produced numerous statements supporting NYYTWA’s proposal and arguing that in comparison, the De Blasio administration’s plan “would spend more money to forgive less debt.” Similar attitudes have been shared by Senator Chuck Schumer (whose own grandfather was a cab driver), Senator Bernie Sanders, Attorney General Letitia James, Representative Alexandria Ocasio-Cortez, and State Assemblymember Zohran Mamdani.

New York State Assemblymember Zohran Mamdani and Senator Chuck Schumer are featured in a video produced by the NYTWA describing the problems with the city's proposed relief plan.

NYTWA believes that a $30,000 down payment and a guarantee from the city would induce lenders to refinance much of their portfolios on terms that are sustainable, if hardly charitable, for owner-drivers.

Singh and his taxi community often reiterate that they’re not asking to be millionaires;  they’re just hoping for a chance at dignified lives and asking the city to return the same respect they’ve given in their decades of service.

“When a passenger notices I made a wrong turn, I’ll apologize and pause the meter while I rectify my mistake,” explained Singh. “This is part of being human, learning from our failures. The city has failed us, but they have the chance to admit their mistake and right this wrong.”

At Sunday night’s campout, a driver turned to ask me what brought me there. I told him my student debt felt similarly insurmountable. He laughed—he had forgotten about his own student loans.