New York City will tighten rules for the purchase and refinancing of taxi medallions following a 45-day review ordered by Mayor Bill de Blasio.
The review, conducted by several city agencies and released Monday, found that brokers who facilitate the purchase, sale and refinancing of medallions often fail to disclose interests in the transactions or to adequately explain terms to borrowers.
Taxi driver advocates said the recommendations don’t go far enough. The New York Taxi Workers Alliance on Monday renewed calls for the city to repay the debt for thousands of drivers whose loans are underwater. Mr. de Blasio, speaking at an unrelated press conference, said the city couldn’t afford to bail out drivers, but would help in any other ways it could.
Medallions are the metal shields pinned to a taxi’s hood that grant drivers the right to pick up passengers on the street. Of New York’s 13,500 medallions, about 3,500 are owned by people who also drive the taxi themselves, according to the city. Most of the remaining medallions are owned by garages that operate a fleet of cars.
Many owner-drivers were plunged into financial distress when the value of a medallion plummeted several years ago to less than $200,000 from a high of more than $1 million just a few years previously. The drivers’ situation has been exacerbated by the influx into the city of about 80,000 ride-hailing vehicles operating for companies such as Uber Technologies Inc. Their arrival has driven down earnings for all for-hire and taxi drivers.
The city’s review was prompted by an investigation earlier this year by the New York Times, which found that taxi industry leaders sought to inflate the value of medallions and that brokers used predatory-lending practices to enrich themselves.
About one-third of New York’s 20 licensed brokers couldn’t provide all of the necessary documentation for transactions they facilitated over the past three years, according to the city’s review. Those cases with missing documentation have been passed to a city unit that could issue fines.
The review also found that drivers were poorly advised about the loans they took out and refinanced and that it was often unclear to borrowers whether brokers charged additional fees or had financial ties to lenders and insurance brokerages.
More than 300 owner-drivers responded to a survey conducted by the review team. About 80% said they had borrowed against their medallion to finance homes, vehicle purchases or college. In many cases, drivers weren’t aware of the terms of the deals.
The survey found that drivers paid a median purchase price of $340,000 for their medallions, but had a median debt outstanding of almost $500,000. About half said they struggled to pay their monthly bills and one quarter said they were considering bankruptcy.
The review found that many drivers had medallion loan payments of between $2,500 to $4,000 a month.
The review team, which included officials from the city’s Taxi and Limousine Commission, said the regulator should amend its rules forcing brokers to clearly lay out the terms of loans and to translate them for drivers, most of whom are immigrants. The city will also set up a unit to monitor and review brokers and a center to provide financial advice to drivers.
Write to Paul Berger at Paul.Berger@wsj.com