CUNA set to challenge credit union regulator's taxi medallion loan sale
WASHINGTON — The Credit Union National Association is considering using a Freedom of Information Act request to force the National Credit Union Administration to release additional information about its decision to sell a portfolio of taxi medallion loans.
But a FOIA may only be the first step.
CUNA President and CEO Jim Nussle hinted that the trade group could be willing to take additional steps beyond the FOIA request, including possible legal action, if necessary.
“That’s a first stop on the journey, but it may not be the last,” Nussle said in an exclusive interview with Credit Union Journal during CUNA’s Governmental Affairs Conference on Monday. “There are other actions that can be taken that could possibly have a lot of teeth.”
Nussle suggested NCUA could have done more to be transparent about its decision-making process around the recent sale of the taxi medallion loans. Because of that, a FOIA request would be its first step in getting more details.
The regulator announced last week that it had sold more than 4,000 taxi medallion loans from two failed credit unions to investment firm Marblegate Asset Management. The regulator did not disclose a price, but The Wall Street Journal reported the sale price as $350 million.
So far the decision has proved largely unpopular. More than 60 cabdrivers, who had traveled to the regulator’s headquarters in Alexandria, Va., to protest the sale during NCUA’s regular board meeting, were deflated by the news. NCUA announced the sale the day before the board meeting.
Rep. Gregory Meeks, D-N.Y., said in a statement that NCUA’s decision “compounds the hardship” that cabdrivers already face in repaying their medallions loans.
In January, CUNA and three CU League partners outlined their concerns regarding a sale in a letter to NCUA's Chairman Rodney Hood. The groups were concerned that a sale to a single buyer could negatively affect the National Credit Union Share Insurance Fund and those credit unions that still hold medallion loans. Instead, the group wanted NCUA to partner with CUs to service the loans and work out modifications with borrowers.
Mark McWatters, NCUA board member, defended the taxi medallion sale, according to his prepared remarks for his speech at GAC. He said that the sale came together after 18 months of managing the assets, completing due diligence and negotiating with potential buyers. This deal was determined to be the least cost option for the share insurance fund.
As the deal was closing, NCUA learned of an effort by the New York Taxi Workers Alliance to form a public-private partnership to buy the portfolio. But a team of senior staff members determined that no one had committed funds to the initiative, and it wasn’t likely to raise the money in the near term.
“[I]t was an exceedingly difficult decision to sell the medallion loan portfolio after meeting with the New York Taxi Worker’s Alliance, taxi drivers and other interested parties,” McWatters said, according to the prepared remarks. “It is critically important to note that we would not have permitted the sale to proceed unless we sincerely believed, based upon our due diligence investigation, that the winning bidder would treat taxi medallion borrowers in a transparent, good-faith manner and in full compliance with all applicable consumer protection laws. As we are deeply sorry for the loss and suffering experienced by taxi drivers and medallion owners over the past several years, this was a principal goal in conducting the auction process and vetting prospective bidders.”
NCUA reached out to 23 firms that have previously handled distressed commercial assets. The agency received six bids in response and after review, advanced two firms to a final due diligence round.
"A discreet sale like this allowed the agency to take all appropriate steps to make sure multiple bidders were involved," an NCUA agency spokesperson said. "The NCUA had an extremely thorough process to retain an industry-leading financial advisor to help evaluate sale options, process and to identify a discrete set of bidders."
According to Nussle, the trade group wants to learn more about NCUA’s internal deliberations, the data it had at its disposal and the different options the regulator considered.
Nussle said that his group was considering the FOIA request given NCUA’s rushed timeline to sell the medallion portfolio. He was concerned that there could be something in the data that the rest of the industry was not privy to that impacted NCUA’s decision.
FOIA requires the full or partial disclosure of information from the U.S. government when it is requested.
“The NCUA is not sharing a lot of information,” Nussle added. “We’re considering taking action as a result of that.”
This story was updated at 5:16 P.M. on Feb. 24, 2020.