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The political machinery in America receives a tremendous amount of input from private industry, which in turn influences how things are regulated. And then when

The political machinery in America receives a tremendous amount of input from private industry, which in turn influences how things are regulated. And then when things go bad, everyone can say it was just a big mistake. Maybe it'll end a few careers, but that's about it. The immigrants in this story had no input in any of this. They had no representation, no influence. They're among the poorest and least influential people in our society, and the finance industry just ran roughshod over them. This will keep happening as long as "we all made mistakes" remains a viable out for these institutions.

skybrian 7y ago
I'm not sure having input into government regulation would have helped as much as just having someone more knowledgeable look at the terms of the loan? Maybe there should be a limit to how big a loan you can sign without getting some kind of legal help?
- mattigames 7y ago
  When a natural-person is involved a voice recording of a good summary of what you are agreeing with should be mandatory by _regulation_, there should be a notarized recorded statement saying something like "I Mohammed Hoque agree to pay 1.7 million dollars before 4 years from today [...]"
- ordu 7y ago
  There is an easier way. It is possible to shift balance of protection to the borrower. As an absurd example: allow borrower to deny his loan. The troubles with too big loans will end instantly, because lenders will think not just twice, but thrice and even ten times. This absurd way is absurd, but lawmakers could make it gentlier in a reasonable way. Give a consumer more protection, shift more risks unto lender's side and viola, you need not to pay fees for a legal help, while system works much more reliable, because lender would pay from his own pocket for a stupid loan. Borrower mistanderstood terms of a loan and couldn't pay? So lets write off 90% of his debt, let him pay remaining 10%. Who is the dumb one now? Not the borrower who couldn't understand the terms of the loan, but a lender who hadn't bothered to make terms to be crystal clear to the borrower. I'm not sure does it counts as a govermental regulation, I believe not, because government needs to tweak system a bit, and then system would regulate itself. In any case it is the easiest way. But lenders do not agree of course.
  - bitcurious 7y ago
    What you are describing is how unsecured loans work now. It’s not like people keep paying when they don’t have money.
- kjeetgill 7y ago
  The thing is, if you run the numbers cab drivers have made this investment and it has been a great investment for a long time. But on 10-20 year timelines who can account for way Uber/Lyft changed everything? I'm not that familiar with the regulations and history around medallion systems, but I can see what the parent post is getting at: Why does a taxi driver need to take out a loan/risk to work? When I take a job, there's risk with options or shares maybe, but I don't incur literal debt to begin work. It's the legal framework around medallions and private contracting that even put that risk on individuals.
  - mbreese 7y ago
    > Why does a taxi driver need to take out a loan/risk to work? This isn’t about a taxi driver... it’s about owning a taxi medallion. You don’t need a loan to drive a taxi. If you want to just drive the taxi, you can work for an existing company. But the company does need a medallion for your taxi. This is much more like starting your own business. With a medallion, you can work your own taxi on your own time schedule - which is the main benefit to the owner. It’s also an asset that you can rent out to others when you aren’t using it. So, taking a new job isn’t the right analogy. Think more like starting your own company (or more accurately, borrowing money to start your own company). There is significant freedom in that, but it also carries risk.
bko 7y ago
> finance industry just ran roughshod over them I don't see how "the finance industry" hurt these drivers. These drivers were required to buy a license for up to $1mm for the right to drive people in taxis. Obviously that's a lot to put up, so banks lent them money to purchase it much like they do for people trying to finance houses, automobiles, boats, or any other high ticket item. I wish the article would actually spell out the terms of the loans rather than relying so much on personal accounts of people involved. The author seems to take issue with interest only loans or long term loans, but mentions how the drivers can barely afford the payments. I don't see how they would be able to afford shorter term loans. I imagine many drivers are going to rightly walk away from these loans, and considering many are interest only, the borrower is pretty much on the hook for the loss in value. The article does mention some fees or debt collectors but I believe they can just walk away and default. Might hurt their credit but its better than the alternative.
- jazzkingrt 7y ago
  I assume filing for bankruptcy means the lender gets to claim the medallion and sell it? That means losing potentially hundreds of thousands in payments already made, as well as the loss of any source of income. I think renting a medallion is possible at that point, but many of these medallion owners seem to have invested their life savings and could be nearing retirement.
  - pfisch 7y ago
    Well maybe people shouldn't be investing their life savings in a single asset...
  - bko 7y ago
    Yes, that's true, but considering that many of the loans were interest only or very long term, the driver did not sink much into the principal. It's kind of weird that the author is so critical of these types of loans when they are very beneficial if the asset value dropped a lot, since now the lender is stuck holding the bag.
- Spooky23 7y ago

skybrian 7y ago

I'm not sure having input into government regulation would have helped as much as just having someone more knowledgeable look at the terms of the loan? Maybe there should be a limit to how big a loan you can sign without getting some kind of legal help?

mattigames 7y ago
When a natural-person is involved a voice recording of a good summary of what you are agreeing with should be mandatory by _regulation_, there should be a notarized recorded statement saying something like "I Mohammed Hoque agree to pay 1.7 million dollars before 4 years from today [...]"
ordu 7y ago
There is an easier way. It is possible to shift balance of protection to the borrower. As an absurd example: allow borrower to deny his loan. The troubles with too big loans will end instantly, because lenders will think not just twice, but thrice and even ten times. This absurd way is absurd, but lawmakers could make it gentlier in a reasonable way. Give a consumer more protection, shift more risks unto lender's side and viola, you need not to pay fees for a legal help, while system works much more reliable, because lender would pay from his own pocket for a stupid loan. Borrower mistanderstood terms of a loan and couldn't pay? So lets write off 90% of his debt, let him pay remaining 10%. Who is the dumb one now? Not the borrower who couldn't understand the terms of the loan, but a lender who hadn't bothered to make terms to be crystal clear to the borrower. I'm not sure does it counts as a govermental regulation, I believe not, because government needs to tweak system a bit, and then system would regulate itself. In any case it is the easiest way. But lenders do not agree of course.
- bitcurious 7y ago
  What you are describing is how unsecured loans work now. It’s not like people keep paying when they don’t have money.
kjeetgill 7y ago
The thing is, if you run the numbers cab drivers have made this investment and it has been a great investment for a long time. But on 10-20 year timelines who can account for way Uber/Lyft changed everything? I'm not that familiar with the regulations and history around medallion systems, but I can see what the parent post is getting at: Why does a taxi driver need to take out a loan/risk to work? When I take a job, there's risk with options or shares maybe, but I don't incur literal debt to begin work. It's the legal framework around medallions and private contracting that even put that risk on individuals.
- mbreese 7y ago
  > Why does a taxi driver need to take out a loan/risk to work? This isn’t about a taxi driver... it’s about owning a taxi medallion. You don’t need a loan to drive a taxi. If you want to just drive the taxi, you can work for an existing company. But the company does need a medallion for your taxi. This is much more like starting your own business. With a medallion, you can work your own taxi on your own time schedule - which is the main benefit to the owner. It’s also an asset that you can rent out to others when you aren’t using it. So, taking a new job isn’t the right analogy. Think more like starting your own company (or more accurately, borrowing money to start your own company). There is significant freedom in that, but it also carries risk.

bko 7y ago

> finance industry just ran roughshod over them I don't see how "the finance industry" hurt these drivers. These drivers were required to buy a license for up to $1mm for the right to drive people in taxis. Obviously that's a lot to put up, so banks lent them money to purchase it much like they do for people trying to finance houses, automobiles, boats, or any other high ticket item. I wish the article would actually spell out the terms of the loans rather than relying so much on personal accounts of people involved. The author seems to take issue with interest only loans or long term loans, but mentions how the drivers can barely afford the payments. I don't see how they would be able to afford shorter term loans. I imagine many drivers are going to rightly walk away from these loans, and considering many are interest only, the borrower is pretty much on the hook for the loss in value. The article does mention some fees or debt collectors but I believe they can just walk away and default. Might hurt their credit but its better than the alternative.

jazzkingrt 7y ago
I assume filing for bankruptcy means the lender gets to claim the medallion and sell it? That means losing potentially hundreds of thousands in payments already made, as well as the loss of any source of income. I think renting a medallion is possible at that point, but many of these medallion owners seem to have invested their life savings and could be nearing retirement.
- pfisch 7y ago
  Well maybe people shouldn't be investing their life savings in a single asset...
- bko 7y ago
  Yes, that's true, but considering that many of the loans were interest only or very long term, the driver did not sink much into the principal. It's kind of weird that the author is so critical of these types of loans when they are very beneficial if the asset value dropped a lot, since now the lender is stuck holding the bag.
Spooky23 7y ago