Melrose Credit Union was seized by state regulators late Friday after the Queens-based lender suffered heavy losses in taxi-medallion loans.
The failure of Melrose represents the second time the New York state Department of Financial Services has seized a local credit union bleeding red ink due to the rise of Uber and other ride-hailing apps. Manhattan-based Montauk Credit Union was seized in September 2015 and later merged into the Bethpage Federal Credit Union.
Melrose, with 23,000 members and $1.8 billion in loans and other assets, is the state’s 10th largest credit union, according to Credit Union Times. About $1.3 billion of its $1.7 billion in loans were made to taxi-medallion owners.
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That was a tough place to be as passengers hailed fewer cabs and the value of New York taxi medallions sank from $1.1 million in 2013 to about $600,000 today. Delinquent loans at Melrose soared to more than $500 million at the end of last year from $55 million in the middle of 2015. The lender was hammered by nearly $100 million in losses last year, plus another $176 million in losses in 2015, according to data provided by Keith Leggett, an economist who tracks credit unions.
DFS officials said Melrose would be operated by the federal National Credit Union Administration and all deposits up to $250,000 would be fully guaranteed, as is customary in bank failures. The state said Melrose was run in an “unsafe and unsound” manner, a nod to its heavy taxi-loan portfolio.
In 2015, Melrose and Montauk, plus Lomto and Progressive Credit Union sued the city and state attorney general’s office, urging them to stop Uber drivers from picking up passengers who hail them using smartphones. A judge ruled against the credit unions.
Melrose Credit Union was seized by state regulators late Friday after the Queens-based lender suffered heavy losses in taxi-medallion loans.
The failure of Melrose represents the second time the New York state Department of Financial Services has seized a local credit union bleeding red ink due to the rise of Uber and other ride-hailing apps. Manhattan-based Montauk Credit Union was seized in September 2015 and later merged into the Bethpage Federal Credit Union.
Melrose, with 23,000 members and $1.8 billion in loans and other assets, is the state’s 10th largest credit union, according to Credit Union Times. About $1.3 billion of its $1.7 billion in loans were made to taxi-medallion owners.
That was a tough place to be as passengers hailed fewer cabs and the value of New York taxi medallions sank from $1.1 million in 2013 to about $600,000 today. Delinquent loans at Melrose soared to more than $500 million at the end of last year from $55 million in the middle of 2015. The lender was hammered by nearly $100 million in losses last year, plus another $176 million in losses in 2015, according to data provided by Keith Leggett, an economist who tracks credit unions.
DFS officials said Melrose would be operated by the federal National Credit Union Administration and all deposits up to $250,000 would be fully guaranteed, as is customary in bank failures. The state said Melrose was run in an “unsafe and unsound” manner, a nod to its heavy taxi-loan portfolio.
In 2015, Melrose and Montauk, plus Lomto and Progressive Credit Union sued the city and state attorney general’s office, urging them to stop Uber drivers from picking up passengers who hail them using smartphones. A judge ruled against the credit unions.
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