The Joint Committee on Financial Services held a hearing on proposed regulation for rideshare companies on Sept. 15. Taxi company supporters wore yellow shirts, Uber supporters wore blue and Lyft wore pink (not pictured).
The ongoing narrative about regulating ride-sharing apps often reads as a conflict between tightly regulated cabbies and self-styled entrepreneurs armed with little more than their personal vehicles and smartphones. But banks have a dog in this fight, too.
The Massachusetts Bankers Association has thrown its support behind a bill introduced by Rep. Michael J. Moran and Sen. Linda Dorcena Forry that would impose some regulations on ride-sharing apps like Uber, Lyft and Sidecar.
“It’s not that people are objecting to Uber or Lyft. I think we all realize that’s part of competition in the marketplace and we accept that’s going to continue,” said Kevin Kiley, the association’s executive vice president and chief operating officer. “We just think it ought to be done within certain parameters.”
Forry’s bill, which Kiley said goes a step further than legislation proposed by Gov. Charlie Baker, would subject Uber and its ilk to fingerprinting and background checks on its drivers, and limit surge pricing, among other requirements.
“Basically, we’re supporting the legislation in part because we have a number of banks that currently have medallion loans they’ve made to taxi medallion owners over the last 10 or 20 years,” Kiley said.
Taxi medallions, those little plates that essentially grant their owners the right to pick up fares, once fetched as much $700,000, but Donna Blythe-Shaw, a spokeswoman for the Boston Taxi Drivers Association, puts that figure closer to $300,000 now.
If a bank financed a medallion at around 50 percent to 75 percent of its market value a few years ago when they were still fetching enviable sums, they may be concerned if the owner is now essentially underwater on the medallion.
Lenders in other markets have certainly felt reverberations from the taxi versus Uber battle. Capital One was sued earlier this year when it quit the taxi medallion lending business in Chicago in favor of a joint venture with Uber. Signature Bank in New York revealed that it had placed most of its Chicago medallion loans on an internal watch list. And Montauk Credit Union, one of four New York credit unions that serve the taxi industry, was placed into conservatorship after bleeding $2 million in net income during the second quarter.
But Massachusetts lenders are considerably more reticent on the subject.
Worcester-based Commerce Bank bills itself as “the largest and most knowledgeable taxi medallion lender in Boston” and earlier this year added three more lenders to its taxi medallion lending team, but the bank declined to talk to Banker & Tradesman about its taxi medallion business.
Brookline Bank is another bank that has financed the purchase of taxi medallions, but spokeswoman Karen Schwartzman said that medallion loans make up “well below 1 percent” of the bank’s total loan portfolio and furthermore that Uber had posed no problems for this line of business.
“I can say that to date, the bank has seen no signs of trouble with these loans,” she said.
That more or less mirrors comments made by two of the bank’s lenders before a moderator’s committee meeting on medallion lending in Brookline last year. According to those meeting minutes, Bill McKenzie told the committee that the bank’s portfolio of medallion loans had not so much as a late payment, let alone a default.
‘Going Under’
While the Brookline bankers outlined fairly attractive loan terms at that town meeting – financing up to 75 percent of a medallion at an interest rate of 4.5 percent and a 20-year amortization schedule – Blythe-Shaw said that many owner-drivers wind up buying the medallions from self-established financers who don’t require a good credit score and three years employment history like a bank would.
Robert Kline, a Newton-based attorney with an expertise in licensing and financing taxi cabs, said that although market value of the medallions has dropped, there’s still some lending going on in that space.
“Uber’s affected the business, no question about that,” he said. “How that affects the finance piece, I think banks are the ones that [need to] talk about that.”
Figures from the Boston Police Department’s Hackney Division recently showed that taxi ridership tumbled about 24 percent early this year, while revenues declined 20 percent, but Blythe-Shaw said that some drivers have lost as much as 50 or 70 percent of their business.
Furthermore, she said that it’s the small-time medallion owners – those who own three or fewer medallions and who own more than 50 percent of the 1,825 medallions in circulation in Boston – who are getting hammered the worst.
“They can’t move them, they can’t get their money back, they’re just going under,” she said. “There’s just no way that this industry and these shift drivers, who are just trying to pay their rent and go home, can compete and survive.”
