by Robert McGarvey

Delta has figured out that our airport experience genuinely sucks – and it says it wants to fix it. Are you optimistic?

Delta’s CFO, Paul Jacobson, is the bearer of these glad tidings. At a recent CNBC conference, Jacobson said, “I think the next area of competition in air travel is in the airport.”

He added: “How do you continue to streamline the on-the-ground experience. It is a big part of how passengers rate the experience.”

So true. Even with Priority Pass, Amex Platinum, Global Entry, and Diner’s Club along with a couple airline credit cards, I dread the airport experience. Where I live, Phoenix, it’s actually not that bad. I live 30 minutes away from PHX via lightrail, the security lines are predictable (and usually short), and it’s an airport where little seems to go awry. When a Centurion Lounge opens in 2020, life will indeed be good.

Delta, incidentally, already has a lounge at PHX. It’s gotten good ink – but count me a Centurion loyalist.

The problem is that I go to PHX to fly elsewhere and the other airports – such as EWR, JFK, DFW – are circles in Dante’s Inferno.

Enter Delta with a $12 billion war chest earmarked for airport upgrades – specifically at LaGuardia, LAX, Seattle, Salt Lake City and Atlanta.

Airlines nowadays are flush with cash and the big carriers seem persuaded they have upgraded the inflight experience as far as they can go, so what’s next on the fix it list? Airports are definitely a mess and indeed we do blame the carrier for our woeful airport experiences.

But is this fixable? By an airline?

Honestly, even clubs, the frequent traveler’s cure for airport misery, are rapidly deteriorating. Journalist Chris McGinnis recently filed a story in the San Francisco Chronicle that was headlined, Crowding pushes airport lounges to raise prices, limit access. The subhead was even gloomier: Finding respite from airport mobs getting tougher.

Wrote McGinnis, “due to their popularity, lounges are getting as crowded as airport terminals.” Club operators are deploying various strategies to better manage, indeed limit, access – but still the complaints grow that at many airports the clubs no longer count as sanctuaries.

I’ve even heard complaints that there was no place to sit in a Centurion, and no place to recharge a phone. Reports of overcrowding at Centurions are plentiful.

Of course club woes are just a symptom of what ails airports today. The short answer is just about everything.

The problem is known: the US just hasn’t opened a new airport in decades (Denver, 1995) and it hasn’t expanded airports to meet demand. Around a billion passengers clog US airports each year and that infrastructure was built to handle maybe half that passenger load. In boom times, like now, the limitations of the infrastructure become painfully obvious.

As far back as 2013, the Washington Post ran a story headlined: Reports say U.S. airports are dangerously close to capacity. Per the story: “Failure to invest in airports and the aviation system will ­result in a steady increase in airport congestion.”

Five US airports rank among the world’s busiest: Atlanta, LAX, DFW, Denver, Chicago O’Hare.

J. D. Power even ranks the country’s most hated airports. LaGuardia wins the prize, nosing out Newark.

What’s the solution? A massive airport instructure renewal plan is just about the only way out. According to the U.S. Travel Association, $130 billion is needed over the next four years for infrastructure involving airports.

Just about everything here is broken. We need more terminals, more runways, more parking spaces, more and better roads leading to the airports, more public transit to and from the airports.

China, by way of contrast, has 236 airports it will build by 2035. That will essentially double the nation’s airport capacity. China also is furiously building roads, bridges, and the rest.

The US, meantime, has made no progress in addressing an airport issue that most experts believe started perhaps thirty years ago. The problems aren’t new, they are years in the making, and what’s needed to do fixes is political will and investment dollars.

Which brings us back to Delta and its $12 billion upgrade fund. The carrier deserves applause – the other big carriers ought to pony up as well – but I just don’t see these efforts having the clout and the cash needed to make fundamental changes in our airports. Of course it’s all nice but nice won’t result in the changes we need.

We need a bold plan that aims to provide an airport infrastructure that will work at least through 2050. Call it a 30 year plan. Anything less just won’t do what we need.

Are any significant politicians showing support for bold air transportation initiatives? Not that I am aware of. That’s a shame.

The future of flying in the US is heading towards more gloom, more crowding, more hectic hours at airports. It doesn’t have to be that way. But until we mount a coherent, sweeping program that’s what we are likely to get.

By Robert McGarvey

Ten times so far this year a credit union has bought a bank, according to Credit Union Times’ count.  Some deals are small – Verve for instance paid $43 million to buy South Central Bank in Chicago.

Some are bigger such as Arizona Federal Credit Union’s buy of Pinnacle Bank in Scottsdale with its $236 million in assets. No details on the purchase price have been released.

In Florida – where the recent credit union buying a bank trend kicked off in 2015 when Achieva Credit Union bought Calusa Bank for $23.2 million — there have been three buy outs of banks by credit unions so far this year.

In the Chicago area, there also have been three purchases of banks by credit union so far this year.

This isn’t an entirely new phenomenon. The first deal dates to July 2011 when United FCU bought Griffith Savings Bank in Indiana.

And the deals keep coming.  

Understand this: some credit union thought leaders are adamantly opposed to this trend.  To them, banks and credit unions are different and never the twain should meet.

Still others worry that as credit unions incorporate more elements from banks – including hiring bank trained staff – they may become more bank like and lose the credit union difference.

Consider this maybe the very most contentious issue in the credit union universe.

Banks incidentally are vocally opposed to the trend – or put more accurately they see this as a proof that credit unions should lose their tax exemption.

The other reality is that community banks are struggling. Their numbers are dwindling as the big banks get bigger and smaller, community banks find it harder to compete. For them, in some cases, the exit strategy is to sell the assets – primarily branches, loans, customers – to another financial institution and if it happens to be a credit union, so be it.  (Here’s a list of many CU – bank deals. Go to page 8.)

Big banks also seem largely uninterested in buying struggling community banks.  For many of the latter, a possible acquisition by a credit union looms as an attractive exit strategy.

But, first, what specifically is in this for a credit union? The St. Louis Fed tackled exactly that question.  Here’s what it said: “So what would entice a credit union to pursue a bank instead of another credit union? For one thing, it may be the fastest way to expand into new business lines that are more closely associated with banks (for example, business lending). The average ratio of business loans to total loans for the acquiring credit unions in the quarter before the transaction was 8.6 percent, whereas the average for the acquired banks was 33.8 percent. The acquisitions of the commercial banks raised the business-loans-to-total-loans ratio in the credit unions to 10.9 percent.”

Moreover, like credit unions, small community banks tend to have strong community ties and know their customers on a more personal level than their large-bank counterparts do. This strong community relationship can be an asset to the acquirer.” 

Other experts suggest that the number of sizable, viable credit unions that are available for merger into another credit union is dwindling. The attractive candidates have already merged, at least most of them have.

Very probably, we will see a continuing stream of credit union purchases of banks or at least parts of banks.  But probably not that many. The St. Louis Fed believes this kind of deal will never become commonplace: “Because of all the regulatory and business-model barriers involved, it will likely never be a dominant transaction type.”

Which brings us to the big issue: are bank purchases in fact good for credit unions?

For starters, know that the bank charter is not transferred in the deal.  A credit union cannot own a bank charter, said Wendell “Bucky” Sebastian, a co-founder of Callahan, longtime CEO of GTE Federal Credit Union in Tampa, general counsel of NCUA, and, at the start of his career in banking, a senior official in an Illinois regulatory agency.  Hear Bucky’s candid podcast for a lot more opinions including Bucky’s optimism about the credit union future. Listen here.

As for foes of bank acquisitions, there’s Jim Blaine, retired CEO of SECU, the giant North Carolina credit union, who has strong opinions on this topic. He ventilates his ideas with gusto in the CU2,0 podcast.  

Blaine opposes credit union – bank mergers. He sees them as a manifestation of an increase in what he calls the commercialization of credit unions.  At their founding, credit unions were created to serve members. Not to sell them products they don’t need which of course is a bank business plan.

Blaine also said that in negotiations between a banker and a credit union executive, he’d bet on the banker to win.

Credit unions just aren’t banks and shouldn’t be, Blaine believes. So keep them apart.

Bucky Sebastian – who supports credit union mergers, definitely ones with other credit unions, in his podcast – also comments that “banks exist for one purpose – to take as much from their customers and to give it to their shareholders as they can.”  That’s true. So ask yourself how that culture blends with a credit union’s.

That deep philosophical concern is aired by Gary Oakland, the retired, longtime CEO of BECU who saw that institution grow from a couple hundred million in assets to over $10 billion during his tenure. (He offers his perspectives on range of issues facing the industry in his CU2.0 podcast – find it here, it posts in late July – and he specifically addresses why BECU grew so big, so fast when many other credit unions did not.)

“You are seeing a change in leadership of credit unions,” says Oakland.  “A lot of new leaders are coming in from the banking industry. There’s not as much development of homegrown leaders.”

Which leaves us with a troubling question: at what point does a credit union assimilate so much bank characteristics that it ceases to be a real credit union and instead becomes a bank? Sure, the charter may say credit union.  But is the institution truly a member focused institution?

Is that case closed, credit union purchases of banks are bad? Not so fast. Some bank branch buys win broad applause. In the Deep South, Hope Federal Credit Union has bought a number of bank branches, mainly from institutions that had announced plans to close those locations.  Hope CEO Bill Bynum talks at length about that strategy in his CU2.0 podcast.

These acquisitions have been widely praised.

Even the cynic Blaine applauds what Hope is doing and he indicated that in negotiations he’d bet on Bynum to beat the bankers.  In some cases Hope may well have gotten the branches at no cost.

That’s a hard deal to turn down especially when a credit union can do tremendous good for the community by using the facilities to offer financial services to a community that might otherwise become a “banking desert.”

That does not mean however that it’s full steam ahead for bank mergers, either. 

Eyes will be on growing numbers of credit unions that have consumed banks, or hired senior bank executives.  The verdict has not been written.

But it will be.

by Robert McGarvey

A state regulator in Illinois. General counsel at NCUA. A co-founder of Callahan Associates. Longtime CEO at GTE Financial.  Head of the National Credit Union Foundation. Guess who.

Meet Wendell Sebastian, call him Bucky.

His has been an extraordinary career and you will like him. For two reasons. He is a vocal credit union cheerleader. And he deeply believes that credit unions – because they serve members, not shareholders – will triumph, that credit unions are absolutely the best financial institution for just about all of us.

Bucky doesn’t shy away from a fight.  Suggest to him that it is high tech credit unions that will prevail and he is quick to argue that in point of fact it is high touch institutions that have been winning.  Of course they feature needed tech but what puts a credit union in the winner’s circle is high touch. He cites Navy Federal as a classic for instance and in this podcast reviews the numbers to make his case.

He is a walking history book too.  Why did credit unions shrink in number from 23,000 40 years ago to maybe 5500 today? Because it was in the plan, says Bucky, and in large part a result of policies put into place when he worked at NCUA in the early 1980s.

Isn’t a shrinking number of institutions a sign credit unions are dying? “Never focus on the institutions, it’s about the members,” says Bucky who points to the extraordinary growth in member numbers.

In this podcast you’ll hear what killed off savings and loans and why credit unions escaped their fate, why community banks may be next to expire (and what may keep them alive), and the big advantage credit union CEOs have over their peers at banks.

What advantage? That they can manage the institution with a eye on the horizon, not on the present quarter, says Bucky.  Managing to the quarter, he insists, is a recipe for disaster.

You want a feel good podcast? You want this one – and you definitely will learn a lot of history in the process.  Related podcasts include the Jim Blaine Marathon and Cliff Rosenthal on CDFIs.

Listen here to the Bucky podcast.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available.

Find out more about CU2.0 and the digital transformation of credit unions here. It’s a journey every credit union needs to take. Pronto

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Go ahead, tell me you don’t think of Arizona when the conversation is about cooperatives.

You would be right.

The Grand Canyon State is not Wisconsin or Minnesota or Vermont.

But your podcaster – me – lives in Arizona and so I asked Nigel Forrest, a research associate at Arizona State University’s School of Sustainability, to update me and you about the state of cooperatives in Arizona.

Keep in mind that Arizona, in its comparative indifference to cooperatives, is akin to perhaps two thirds of the nation’s states.

And the good news is that Forest believes there is real upside potential for growth in cooperatives in Arizona.

He sees that as good, because cooperatives also bring more sustainability, more economic democracy.

Right now he pegs the number of cooperatives in Arizona at 50 to 60, mainly credit unions and the second biggest group is rural electric co-ops.

But he says there is vast potential for many new worker co-ops, especially as aging small business owners retire. They could close their business – or just maybe sell it to their employees.  It’s obvious which is better, for the employees, also the community.

Forrest also hopes for a new food co-op in Phoenix, the nation’s fifth biggest city and it has none right now. But he sees real possibilities.

He also has ideas about how to grow awareness of cooperatives.

And the ideas just may work in other states.

He also reports on new platform co-ops that are surfacing in Europe and that just may find use in the US, Arizona included.

Listen up.

This podcast includes a reference to the Community Purchasing Alliance – podcast here.

The food co-op expert whose name I blanked on is the Food Cooperative Initiative – podcast here. 

Cannabis banking. Data breaches.  Taxation of credit unions. The disappearance of small credit unions.  The rise of $10 billion+ credit union behemoths. Welcome to the world of Caroline Willard, CEO of the Cornerstone League and, before that, she spent a decade at Co-Op in senior marketing slots.

What do credit unions need to do to survive? What do leagues need to do? Willard offers candid and also optimistic thoughts about these life and death questions.

She also offers insights into what leagues can do to help small credit unions survive in an age of ever more complex and expensive compliance requirements.

And she challenges credit unions to be a bit more like Rocket Mortgage – and if you want to continue to write home loans you will pay heed.

Pay heed too to her thoughts on how taxation of credit unions just might be an existential threat to the industry.

Related podcasts in this series include the two-pack on cannabis banking, Teresa Freeborn on CUNA’s $100 million credit union awareness campaign, and Joe Bergeron of the Vermont League and Pat Conway of the Pennsylvania – NJ league

Listen up here.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available.

Find out more about CU2.0 and the digital transformation of credit unions here. It’s a journey every credit union needs to take. Pronto

By Robert McGarvey

Washington, D.C. district attorney Karl A. Racine just dropped a bomb on Marriott International – and we all should applaud him.

The target of Racine’s ire: resort fees, charged by increasing numbers of hotels who have decided it is so easy to pick our pockets, they would be fools if they didn’t. So $20, maybe as much as $50 is slapped on our hotel room rates but those numbers don’t show up when we search in Expedia, Trivago, etc.

Resort fees can make a huge difference. Just this a.m. I looked at an Arizona hotel that had a summer special for Arizona residents only. The nightly rate: $224. In the fine print however I’m told there’s a $41 resort fee. That’s a nearly 20% bump.

A guess is that industrywide resort fees now put $2.7 billion, or more, in hoteliers’ pockets yearly.

Enter AG Racine.  “Marriott reaped hundreds of millions of dollars in profit by deceiving consumers about the true price of its hotel rooms. Bait-and-switch advertising and deceptive pricing practices are illegal. With this lawsuit, we are seeking monetary relief for tens of thousands of District consumers who paid hidden resort fees and to force Marriott to be fully transparent about their prices so consumers can make informed decisions when booking hotel rooms.”

The lawsuit elaborated: “One key effect of this price deception is that consumers shopping for a hotel room on either Marriott’s website, or an online travel agency site (OTA) like Priceline or Expedia, are misled into believing a Marriott hotel room is cheaper than it actually is.”

Marriott of course has a different take.  In an interview on LinkedIn, CEO Arne Sorenson vigorously defended the fees.  He said: “You’ve got resort fees in hotels, baggage fees in airlines. None of us as consumers necessarily love it. What we’ve tried to do is be very transparent with disclosure.”

What absolute nonsense.  

Everytime we fly we have a choice – do we pay to check a bag or don’t we?  Personally I have never paid to check a bag. As in not once.

At many resorts the resort fee is inescapable.  Go ahead, try. Say: I don’t plan to swim in the pool, use your idiot gym, don’t want the junk newspaper, and am perfectly happy to be denied all that you bundle in it.

And I definitely don’t want the hotel WiFi which is dangerous to use.

Used to be a loud consumer could talk his/her way out of a resort fee at the check in desk. It has gotten much, much harder. Hotels are digging in their heels.

The greed multiplies. Now more hotels in urban areas are imposing “urban fees.”  According to the New York Times the Sofitel in Washington DC slaps guests with a $25 daily fee to cover “premium” Internet access, bottled water, yoga classes, and access to a bike share program. Many, many others are doing likewise.

Is there anything on that list you actually want? Or would use? Maybe the bottled water.

Some 55 hotels in San Francisco are reported to charge a resort or urban fee, for instance.

Back up a step. Is there real reason to believe now is a moment when resort and urban fees may in fact vanish?

I have written about resort fees for some years. Nothing changed except the fees got bigger and more resorts and hotels charged them.

Now things look different however.

According to Skift, “’The real takeaway from this lawsuit is to have an important jurisdiction file against a big company,’ said [NYU’s Bjorn] Hanson. ‘Other hotels will have to wait and see what happens, but other states and jurisdictions will feel that now is the time to go after them.’”

Hospitality lawyer Jim Butler notes this: “We have cautioned that consumer frustration over this issue is very high, and government agencies have periodically shown significant interest in jumping on a populist bandwagon. But today, it looks like the situation may have finally reached a turning point.”

What’s an individual hotel guest to do?  Act on what Hanson said. Write your state attorney general and urge him/her to follow in Washington, D.C.’s lead.  Handy list here.  Another list here.  

For an ambitious AG in a Democratic state, it’s an easy and sure way to grab headlines, win better name recognition, and get known as a consumer advocate. Goodby AG, hello governor.

Yes, hoteliers don’t like what they see coming. But it’s hard to have sympathy for folks who have been picking our pockets since perhaps 1997. 

by Robert McGarvey

If you are reading this on hotel WiFi, sign off now.  A new Bloomberg report underlines how porous hotel WiFi networks are. This is a long look at the problem and that’s good because it is a grim reality that savvy travelers need to know about.

Do you care if hackers have your credit card numbers, maybe passport info, possibly driver’s license details, hotel loyalty program log in and password, and probably more? Because they do. Because hotels do not care about your privacy. They just don’t.

Of course this week’s news is about airlines and breaches – specifically BA – and they have a sorry history of poor defense against hackers. Don’t get distracted however. Airlines are bad at this. But hotels are simply the worst.

Forgive me a Cassandra moment. I have been writing about how much hotel WiFi sucks for at least a decade. The stories are manifold and they always say the same: hackers long ago figured out that hotels have essentially no protections on their wifi networks so it is very much a wild west where an Internet caveat emptor prevails.

Except the odds are stacked against you: the hackers are very good at their work, which is stealing salable data.  Hotels are very bad at protecting our data. Hotel group after hotel group has fallen victim to hackers. Trump.  Hard Rock. Hilton. Marriott. 

Information security blogger Brian Krebs has reported that the Marriott (Starwood) breach involved 500 million of us.  

In a mea culpa, Marriott said: “The company has not finished identifying duplicate information in the database, but believes it contains information on up to approximately 500 million guests who made a reservation at a Starwood property.  For approximately 327 million of these guests, the information includes some combination of name, mailing address, phone number, email address, passport number, Starwood Preferred Guest (“SPG”) account information, date of birth, gender, arrival and departure information, reservation date, and communication preferences.  For some, the information also includes payment card numbers and payment card expiration dates, but the payment card numbers were encrypted using Advanced Encryption Standard encryption (AES-128). There are two components needed to decrypt the payment card numbers, and at this point, Marriott has not been able to rule out the possibility that both were taken.  For the remaining guests, the information was limited to name and sometimes other data such as mailing address, email address, or other information.”

As for who hacked these hotels, nobody knows.  In many cases it doubtless is ordinary, common criminals.  In other cases, something else may be afoot. Noted Bloomberg: “Marriott hasn’t found any evidence of customer data showing up on dark-web marketplaces, CEO Arne Sorenson told a Senate committee hearing in March. That sounds like good news but may actually be bad. The lack of commercial intent indicated to security experts that the hack was carried out by a government, which might use the data to extrapolate information about politicians, intelligence assets, and business leaders.”

Yep.  The Chinese are believed to be voluminous acquirers of data. But the Russian aren’t slouches. Several European governments are in the game too.  And the US government increasingly is active. In that last case it is difficult to see a hack on a domestic company. But impossible? Not really.

Understand this: hotels are truly bad at protecting data. It’s an industrywide malady.  And hotels are lots worse than most other industries. Bloomberg posits a theory: “Hospitality companies long saw technology as antithetical to the human touch that represented good service. The industry’s admirable habit of promoting from the bottom up means it’s not uncommon to find IT executives who started their careers toting luggage. Former bellboys might understand how a hotel works better than a software engineer, but that doesn’t mean they understand network architecture.”

That rings true to me.

Bloomberg went on: “There’s also a structural issue. Companies such as Marriott and Hilton are responsible for securing brand-wide databases that store reservations and loyalty program information. But the task of protecting the electronic locks or guest Wi-Fi at an individual property falls on the investors who own the hotels. Many of them operate on thin margins and would rather spend money on things their customers actually see, such as new carpeting or state-of-the-art televisions.”

In the big chains the vast majority of hotels are owned by “asset holders” – everything from pension funds and big insurance companies to wealthy individuals.  They have to be persuaded to fund big ticket campaigns. And often they haven’t been.

The result in the hotel business is a patchwork of old, cruddy, unreliable technology.

But you do not have to be a victim. There is nothing we can do to strengthen the defenses around a hotel’s property management system, etc. But we can take steps to protect ourselves when it involves WiFi.

You have three options.  Definitely use them in hotels, but also in airports, coffee shops, and airport lounges. I don’t guarantee your safety but I promise you will be much, much safer than if you don’t take such steps.

O Create a personal hotspot with your cellphone and log in via it.  Cellular data is much, much more secure than is hotel network data. Not perfect. But good enough for most of us. This has been my go to for some years.

O Use VPN, a virtual private network.  There are known limitations to the security delivered by VPNs.  I personally no longer use one. But I know many companies require their traveling execs use a vpn and if that’s policy, it is much, much better than logging on naked to a hotel network.  

O Use Silo or a similar secure browser. The secure browser processes all web data inside a secure container so even if a user accesses malware it’s no harm, because the data won’t reach the user’s computer. Silo also encrypts traffic to shield it from prying eyes. A tool such as Silo offers more robust protection than do VPNs.  (Note: I have been paid by Silo’s developer for past work. That company had no involvement in this column and did not pay me for this.)

That’s three choices.  On your next hotel stay when you log into the Internet use one of the three and know that you will be a lot safer than the guests who log into the hotel’s computer. There is no excuse for not protecting yourself.  Not when you know just how perilous hotel networks are and will almost certainly remain.

Elder fraud is big business. The FBI calculates last year’s losses at over $700 million and involving two million seniors.

That’s a lot of pain.

The scams are predictable. “Your grandson has been arrested. He’s in jail in Memphis.  You need to bail him out. It’s dangerous. Send $5000 in gift cards.”

There are variations. But the usual drill is that a relative has fallen into trouble and the senior can be the hero.

Horrible.

But now credit unions are entering this scene.

Here to tell us what credit unions are doing is Walt Laskos, senior vice president, strategic communications at the Cooperative Credit Union Association, a multi state league covering Massachusetts, New Hampshire, Rhode Island and Delaware.

Leagues – usually – spend the bulk of their time lobbying.

But CCUA is putting a lot of energy into fighting elder fraud and helping credit unions to do likewise.

It’s also very, very good PR for credit unions, says Laskos.  That’s not why CCUA does it but the side benefit is really.

Listen up as he talks about what CCUA is doing, with whom, and what the community reaction has been.

Hint: think very very positive

Listen up here.

Like what you are hearing? Find out how you can help sponsor this podcast here. Very affordable sponsorship packages are available.

Find out more about CU2.0 and the digital transformation of credit unions here. It’s a journey every credit union needs to take. Pronto

By Robert McGarvey

New York City mayor Bill de Blasio has released a report that skewers the NCUA for failing to work with taxi medallion borrowers who owe much more on their medallion loan than the medallion is worth.  And stressed drivers, a few at least, are committing suicide in despair.

The report did not pull its punch: “credit unions taken over by the NCUA are often the least willing to work with drivers struggling to afford their monthly loan payments.”

Read that again. New York City is saying NCUA, sitting on a huge bucket of medallion loans that are backed by an asset – the medallion – that continues to trade at a small fraction of its highest prices, which often eclipsed $1 million. Lately they have sold for $160,000 – is showing no willingness to flex in finding a resolution to these loans.

NCUA has issued a quick denial: “The NCUA, as liquidator for the failed credit unions, is working with these borrowers to modify credit union loans where possible through payment reductions, lower interest rates, or term adjustments,” said agency spokesperson John Fairbacks in a statement reported by CuTimes.

“We remain committed to balancing the needs of these borrowers with meeting the congressionally mandated requirement for the NCUA to ensure the safety and soundness of credit unions and the National Credit Union Share Insurance Fund,” Fairbanks added.

NCUA owns medallion loans from at least  three credit unions: LOMTO, Bay Ridge, and Melrose.  The Office of the Inspector General issued a baleful report in March.  The loss to the National Credit Union Share Insurance Fund is estimated at $765.5 million.

Why has the taxi medallion lost so much value? It’s not just a New York issue, by the way. Medallions have cratered in San Francisco and Philadelphia, to name just two.  The root cause: the proliferation of Uber and Lyft as more of us turn to the platform transportation companies. There also are multiple nascent worker-owned cooperatives focused on creating city specific Uber competitors. (Hear a podcast on such ventures here.)

As for why the credit unions blew up, the OIG said: “The Credit Unions maintained significant concentrations in loans collateralized by taxi medallions. Except for credit unions that qualify for an exception, the Federal Credit Union Act limits the aggregate balance of member business loan (MBL) portfolios to 175 percent of the credit union’s net worth. This statutory requirement is implemented in NCUA’s regulations. All three Credit Unions qualified for an exception from this limit based on NCUA granting their charter for the purpose of making MBLs or having a history of primarily making MBLs prior to September 30, 1998. Technological innovation, specifically mobile ridesharing (or ride-hailing) companies such as Uber and Lyft, gained market share in cities across the country and caused disruption to the taxi industry. The disruption to the industry resulted in financial difficulty for many traditional taxi drivers across the country,and impacted the Credit Unions significantly through increased delinquencies and losses on loans collateralized by taxi medallions.”

And the credit unions significantly mismanaged a collapsing marketplace, per the OIG: “The Credit Unions failed to manage their respective loan portfolios in a safe and sound manner. Examiners repeatedly noted the Credit Unions were engaged in unsafe lending practices, in particular inadequate loan underwriting and monitoring of taxi medallion loans.

Specific examples of inadequate underwriting include frequent failure of the Credit Unions tofully analyze borrower financial information, insufficient detail included in credit memoranda to make a fully informed lending decision, risky loan terms, unsupported cash out refinances, inadequate credit risk management policies, and failure to identify and account for modified loans as Troubled Debt Restructures (TDRs). Additionally, the Credit Unions frequently based lending decisions on inflated market values of taxi medallions rather than industry accepted best practices for loan underwriting such as cash flow analysis, debt service coverage, and secondary sources of repayment.”

Here’s the present reality: it is highly improbable that more than a fraction of the medallion holders will be able to repay those inflated loans.  Their incomes have collapsed as more riders shifted to Uber, et. al. It also is increasingly difficult to keep a medallion on the streets and working 24/7, the old fashioned model.  Drivers are scarcer as more have shifted to driving for Uber and Lyft.  

According to the NY Daily News, the average indebtedness of a medallion loan holder is upwards of $340,000 apiece. According to the Daily News, “Their loan payments ranged from $2,500 to $4,000 per month — in 2018 an average yellow cab medallion brought in $10,200 per month, data shows. The additional costs of buying cars, maintenance, insurance and other expenses leaves many medallion owners scraping by.

Half of the medallion owners surveyed said they struggle to pay bills on time, and one in four said they are considering bankruptcy.”

Some agitate for New York City to bail out the drivers and assume some of the cost of the medallions but de Blasio says that is not happening. “The honest truth is, it’s something we can’t reach,” said de Blasio. “We do not have the capacity as a city to provide that. I wish we did, but we don’t.”

De Blasio – obviously – wants NCUA to eat more of the medallion debt.  

NCUA wants de Blasio to eat the debt.

Right now both are choking.

Does anyone know how to perform the Hemlich before more taxi drivers die?

Robert McGarvey drove a medallioned cab many years ago in Boston and Cambridge, Mass. It was hard work then, it’s hard work now.

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Talk to Cathie Mahon, CEO of Inclusiv, and it’s a fast ride into what mission makes a credit union special, distinctive and in her mind the answer is clear: serving the underserved and usually that means economically disadvantaged.

She has tantalizing insights too. For instance: she tells why the business model of community development credit unions may in fact be primed for greater success than the model followed by most credit unions.

This is all about making credit unions work for their communities.  That’s cooperative principles in action.

There are about 1000 so-called community development financial institutions (CDFIs). They do good work. Tune in to find out more.