Taxi Drivers in need of bailout
by Sebastian Guccione
Staff Traffic Guard
Representative Alexandria Ocasio-Cortez (AOC) has called for a federal government bailout for taxi drivers. During a Congressional hearing to with taxi drivers and reform advocates on September 27th, she opined that “regulators supervising bank and credit unions [engaged in] predatory lending and collection practices that has led many taxi drivers, some of [her] constituents, to suicide.”
What is AOC referring to? It’s all about medallions. A taxi medallion is the required permit that enables drivers to operate taxis. From 2002-2014, New York City medallion prices rose to over $1 million while drivers, on average, made less than $30,000 each year. Of the approximate 4,000 drivers that bought medallions during that time period, over 950 have declared bankruptcy, thousands more are in financial turmoil, and a growing number have committed suicide.
The scheme works as follows: first, powerful industry leaders, including fleet owners, banks, and city officials work together to inflate the price of medallions to prices upwards of $1 million. Next, under-regulated lenders give out risky, immoral, and high interest loans to people eager to find work, most of them immigrants who at the time had a limited understanding of English and the deals they were agreeing to. Finally, drivers end up making miniscule, if any progress on the loan; they are financially trapped, and industry leaders make hundreds of millions of dollars through exploitation. Profits are far from being exclusive to private parties; Bhairavi Desai, the head of the New York Taxi Workers Alliance, stated that during economic decline in the early 2000s, New York City had auctioned off medallions in an attempt to balance budgets, and as a result made over $850 million.
A New York Times investigation created a profile on affected New York taxi drivers:
“The investigation found example after example of drivers trapped in exploitative loans, including hundreds who signed interest-only loans that required them to pay exorbitant fees, forfeit their legal rights and give up almost all their monthly income, indefinitely.
“A Pakistani immigrant who thought he was just buying a car ended up with a $780,000 medallion loan that left him unable to pay rent. A Bangladeshi immigrant said he was told to lie about his income on his loan application; he eventually lost his medallion. A Haitian immigrant who worked to exhaustion to make his monthly payments discovered he had been paying only interest and went bankrupt.”
Largely due to ridesharing services such as Uber and Lyft, today the value of taxi medallions has dropped to less than $150,000, creating an impossible situation for some drivers who want to sell their medallion and retire. One driver, Douglas Schifter, shot himself in front of city hall, after posting a message on Facebook expressing his frustration with the economic difficulties drivers face and the failure of politicians to offer aid.
Mayor de Blasio rejected the notion of a city bailout for drivers, stating that “[i]f we did that, it would come out of schools, it would come out of police, it would come out of many other things—we just don’t have that money.” He did, however, offer support for AOC’s call for a federal government bailout.
AOC has called the loan and collection practices “manufactured financial indentured servitude.” As she and others rally support for a bailout and give the issue national attention, a lack of relief is likely to continue the trend of bankruptcy and suicide.