Montauk Credit Union, a large provider of loans to taxi medallion owners, was seized on Friday by New York State’s top financial regulator.
The New York State Department of Financial Services said the seizure was necessary because the credit union, located in Manhattan’s Chelsea district, suffered from “unsafe and unsound conditions.”
The National Credit Union Administration was appointed as conservator for Montauk, which will remain open and operate normally, with many accounts insured up to $250,000.
Taxi medallions, which yellow cab drivers in New York City need to operate, have lost value as the rise of Uber and other ride-sharing services cut into demand for cabs.
This has resulted in a surge in delinquencies at credit unions specializing in medallion loans, according to financial reports filed with the NCUA.
As of June 30, Montauk had $19.25 million of loans that were at least 30 days past due, more than twice the $9.45 million of delinquent loans it had six months earlier.
The credit union also had 2,893 members and $178.5 million of assets as of June 30.
Chartered in 1922, Montauk was one of four credit unions specializing in medallion loans that in June sued New York City and New York State to stop Uber from serving passengers who use their smartphones to hail rides.
They said Uber encroached upon their exclusive right to pick up passengers on the street, and that its rise has driven down the value of medallions, which once topped $1 million, by as much as 40 percent.
But last week, State Supreme Court Justice Allan Weiss in Queens County ruled against the credit unions, which also included Lomto Credit Union, Melrose Credit Union and Progressive Credit Union.
The four credit unions had made a combined $2.47 billion of loans secured by 5,331 medallions, the judge wrote.
A Montauk spokesman referred a request for comment to the NCUA, which had no immediate comment.
(Reporting by Jonathan Stempel in New York; Editing by Alan Crosby)
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