Taxi Lender Shares Glum Capital Outlook

Chalk up another potential casualty to Uber’s meteoric rise to dominance of the ridesharing industry, as an almost $2 billion lender that finances New York City’s yellow taxi trade is warning that it has become undercapitalized, according to a report from Financial Times.

Melrose Credit Union, a lender that provides traditional savings accounts and mortgages, as well as loans to cab owners to help finance the high cost of the city’s medallions (think of it as a license that allows a cabbie to pick up passengers), has fallen below its required capital levels. As a result, the National Credit Union Administration (NCUA), which oversees such lenders, will issue a demand that it take “prompt corrective action.”

If Melrose Credit Union does not submit a net worth restoration plan within a month, which the NCUA must approve, it faces the threat of restrictions being imposed on its business.

This is just the latest blow to hit the reeling taxi cab industry since the rise of Uber and other ridesharing apps. In the past three years, the price of a New York City taxi cab medallion has dropped from about $1 million to around $500,000 as more and more cabbies seek to unload their medallions while faced with stiffer competition from Uber. The number of taxi cab operators who have defaulted or been late on their payments for the medallions have also steadily increased.

Melrose Credit Union, which reports assets in the range of $1.9 billion, showed a drastic increase in losses for the second quarter compared to the first, jumping from $5.6 million in losses in the first quarter of this year to $57 million in the second, according to FT. Borrower delinquencies also increased about 17 percent in the quarter to $435 million, while the Queens-based credit union has had to restructure $359 million worth of loans.

But Melrose Credit Union is not the only lender to post medallion losses either.

Lomto, another New York City credit union, has had to restructure $34 million worth of loans and posted a second-quarter loss of $4.3 million, according to FT.