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Facing a new regulatory crackdown that they say will severely impact their business, Uber and Lyft made an unusual proposal to New York City’s government: stand down, and in exchange we’ll bail out struggling yellow taxi drivers. The response was a polite no thanks.
The proposal — to create a $100 million “hardship fund” to support individual taxi medallion owners — was “summarily rejected” by the City Council and Mayor Bill de Blasio’s office, Joe Okpaku, Lyft’s vice president for public policy, told The Verge. “It’s a little bit astonishing to us.” Of course, there were strings attached. The ride-sharing companies, including carpooling service Via, wanted the city to drop its proposals to cap the number of new Uber and Lyft vehicles and set a wage floor for drivers. In exchange, they said they would create this fund that they claim would pay out “tens of thousands of dollars” to individual medallion owners “right away.”
The companies would contribute $20 million a year for five years to the fund to support medallion owners. It was intended to help individual medallion owners, though, and not corporate owners who hold multiple medallions. Okpaku said he has spoken to the Robin Hood Foundation about executing the fund, but a spokesperson for the foundation says talks are just preliminary and no deal has been reached. A spokesperson for Uber said the company does not comment on private conversations.
Uber and Lyft claim a cap on vehicle licenses would send wait times soaring and driver earnings plummeting. They also say a cap would disproportionately affect outer borough residents, including low-income communities and people of color. “The cap bill would set things back to a time when service levels were horrible in the outer boroughs,” Okpaku said.
The offer to bail out taxi drivers is an unforeseen twist in the years-long struggle by New York City regulators to contain the explosion of ride-hailing app drivers. City Council members have said they were partly motivated by the plight of taxi medallion owners, who have seen the value of their licenses plummet in recent years in direct correlation to the rise of ride-hailing apps. Six taxi drivers have committed suicide in the last six months, a grim reminder of the human costs of technological disruption.
Uber’s response to the proposed bills was to go on the offensive. A message appears on the homepage of its app for New York City users with the title, “Arriving now: Higher prices and increased wait times.” The company has been calling Uber customers directly, asking them to send messages of support for Uber to their council members, according to BuzzFeed. Lyft has been emailing customers with its own appeal to “speak up for ridesharing.”
(Not part of the effort? Any in-app trolling of local politicians. In 2015, when Mayor de Blasio first proposed restricting the number of Uber and Lyft drivers, Uber responded by creating a “DE BLASIO” option in its app that made all the cars disappear.) With its offer, Uber and Lyft appear to be trying to muddy the conversation around the proposed regulation, which may be voted on as soon as next week. It puts pressure on the mayor and the City Council to respond with their own proposal to rescue underwater medallion owners.
For its part, the city believes its already doing that. “The Administration believes the Council’s approach remains the most holistic way to help drivers support their families and to address congestion,” a spokesperson for the mayor said in a statement.
The City Council agrees. “From the very beginning, the council has engaged with all stakeholders on this legislative package,” a spokesperson for Council Speaker Corey Johnson said. “Those dialogues were extremely productive and informed the proposals that we put forth. We don’t negotiate in public, but we can say that we are confident the bills that will be voted on will help drivers, reduce congestion and bring fairness to the industry.”
“Lyft and other high-volume for hire vehicle companies are welcome to establish such a fund with a non-profit and assist drivers who are experiencing serious financial difficulties,” he added. “They don’t need any Council authority to do that.”
Update August 1st 6:48 pm ET: A previous version of this story said Lyft was working the Robin Hood Foundation to create a fund for taxi drivers. While Lyft has reached out to Robin Hood Foundation about the fund, talks are just preliminary and no deal has been reached. The story has been modified to reflect this.
© 2018 Vox Media, Inc. All Rights Reserved
How a cheap car payment can help you on the bankruptcy means test. The 2005 Bankruptcy law, known BAPCPA or sometimes BARF, was designed to make bankruptcy much more painful for families making over the average income in each state. For Virginia, in the summer of 2018, that’s $103,549 for a family of 4. Or […]
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One of the most common questions that we’re asked by clients who own “underwater taxi medallions” (where the value of the medallions is less than the amount of the loan secured by the medallions) that are owned by a corporation or a LLC is if we can “cram down” the taxi medallion loan in a chapter 11 bankruptcy filing. “Cram down” means that the bank/secured lender is required to accept less than full repayment of their loan.
If it were possible to cram down the average taxi medallion loan, the result would be advantageous to many taxi medallion owners–however, the reality is more complicated. For purposes of illustration, let’s assume that a corporation or an LLC owns one medallion that is subject to a $700,000 bank loan and the medallion has a current value of $165,000. Section 506(a) of the Bankruptcy Code provides that the bank (secured lender) has a secured claim of $165,000 (the value of the medallion) and an unsecured claim of $535,000 ($700,000 less $165,000). In a typical chapter 11 case under this scenario, the secured portion of the lender’s claim would be paid the present value of $165,000 over the duration of the plan (which could be five or more years) and the unsecured portion of the claim would be paid pennies on the dollar (let’s assume for this example 10 cents on the dollar or $16,500). Accordingly, in the chapter 11 plan, the bank would be paid a total of $222,120.02 ($205,620.02 (the present value of $165,000 over five years at a discount rate of 4.5%) + $16,500) over the duration of the plan instead of $700,000.
The above scenario would be a wonderful result for the underwater taxi medallion owner, but it’s difficult to achieve. Section 1111 of the Bankruptcy Code governs claims and interests in a chapter 11 caseand § 1129 pertains to the confirmation of a chapter 11 plan. With respect to the confirmation of a chapter 11 plan, the following needs to be noted:
In this author’s experience, about 10% of the chapter 11 bankruptcy filings for small businesses in the Southern District of New York are confirmed.2.
It’s an expensive process to file a chapter 11 bankruptcy. The filing fee is $1,717, the debtor’s legal fees are approximately $20,000 to $25,000, U.S. Trustee quarterly filing fees must be paid and the debtor (medallion owner) needs to obtain insurance, set up debtor-in-possession bank accounts and file monthly operating reports with the U.S. Trustee’s office (necessitating the retention of an accountant or an accounting firm). 3.
To be confirmed, a chapter 11 plan must pass several tests. One of these tests is the “best interest of creditors” test–creditors must not receive less in chapter 11 reorganization then they would if the case was filed as a chapter 7 liquidation. What that means is if the medallion is worth $165,000, then the secured creditor in a chapter 11 case must receive payments with a present value of $165,001. The plan proponent must also show “feasibility,” that the debtor will be able to make the payments required under the plan based on future earnings or assets or property that they own.4.
Section 1129(b)(2)(a) of the Bankruptcy Code provides three possibilities related to the “fair and equitable” test to “cram down” a secured creditor: (1) full payment of the claim through a new loan at market value interest secured by the pre–petition collateral (not possible in the present market for taxi medallions); (2) sell the collateral with liens attached in the proceeds of the sale (not possible for taxi medallion owners who wants to continue to own their medallion); or (3) they must give the secured creditor the “indubitable equivalent” of its claim (essentially, payment in full or abandonment of the collateral to the lender).5.
If the above obstacles to confirmation of a chapter 11 plan were not enough, there is yet another hurdle–§ 1111(b)(2) of the Bankruptcy Code, which provides that if the loan was made on a non-recourse basis to the debtor, then the secured creditor can elect to have the full amount of their loan treated as secured (under our fact pattern to have their secured loan valued at $700,000 not $165,000). A non–recourse loan means that the loan documents provide that in the case of a foreclosure, the secured creditor is only able to obtain possession or seek recourse against the medallion and other collateral for the loan and not any other assets of the debtor.
Having reviewed the loan documents for many medallions, including the promissory note, the security agreement and the UCC-1 filing, it is this author’s experience that the vast majority of taxi medallion loans are non–recourse; accordingly, the secured creditor has the right and will be expected to make the §1111(b)(2) election. Moreover, since most taxi medallions are subject to a loan, the debtor must make loan payments and most medallions subject to a loan are not profitable, if the § 1111(b)(2) election is made, it will be almost impossible for an underwater taxi medallion owner to confirm a chapter 11 plan.
So, if the “cram down” of a secured creditor in chapter 11 bankruptcy isn’t possible, what is the underwater taxi medallion owner to do? We believe that the optimal strategy is to do the following: (1) retain an experienced attorney for asset protection planning (proactive legal action that protects your assets from future creditors, divorce, lawsuits or judgments); (2) engage in aggressive negotiations with the bank to refinance the loan or negotiate to surrender the medallion and other collateral for the loan; and (3) if the negotiations are unsuccessful, the taxi medallion owner (or guarantor) should consider filing for chapter 7 bankruptcy. Medallion owners who own underwater taxi medallions are encouraged to contact Jim Shenwick and arrange for a consultation to discuss the best solution for them. Jim Shenwick.
Arizona Supreme Court Decides Statute of Limitation runs from the date of first uncured missed payment
Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ 
Supreme Court, 7-27-18) Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.
Decision:
Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2). We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.
History:
Santos moved for summary judgment, arguing that the claim was barred by the six-year statute of limitations applicable to credit-card debt under § 12-548(A)(2). Santos maintained that the Bank’s cause of action to recover the entire debt accrued after the first missed payment in February 2008. Mertola countered that a missed payment gives the creditor the right to sue only for that payment. According to Mertola, the cause of action for the entire debt could not accrue until the creditor accelerated the debt. The superior court granted Santos’s motion, finding that “all of the breaches” alleged by Mertola “occurred more than six years prior” to it filing this action.
The Arizona Supreme Court reversed a very bad court of appeals decision.
The court of appeals reversed, agreeing with Mertola that Santos’s missed payments, by themselves, gave the creditor the right to sue only for those payments. Mertola, LLC v. Santos, 241 Ariz. 572, 574 ¶8, 575¶ 13 (App. 2017). The Arizona Supreme Court reversed this very bad decision (yea for them).
What if borrower cures the missing payments?
Consistent with our decision in Gust, Rosenfeld, we hold that when a credit-card contract contains an optional acceleration clause, a cause of action to collect the entire outstanding debt accrues upon default: that is, when the debtor first fails to make a full, agreed-to minimum monthly payment. Accord Taylor v. First Resolution Inv. Corp., 72 N.E.3d 573, 588 (Ohio 2016). This rule will encourage creditors to promptly begin their collection efforts and protects debtors from stale claims. See Navy Fed., 187 Ariz. at 495 (acknowledging the incentive to begin collection efforts when a cause of action accrues at default). But, as we held in Browne, a debtor may cure a default if the creditor accepts a payment of arrearages that brings the account current consistent with the parties’ contract. 117 Ariz. at 75. By allowing the debtor to cure the default, the creditor relinquishes its pending cause of action to collect the debt, and the statute of limitations commences only upon a new default. Partial repayment, however, does not cure the default or reset the limitations period.
Click here to read full decision….
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By Dan Rivoli and Jillian Jorgensen The City Council will once again explore capping the number of vehicles driving for Uber and similar app-based taxi services in New York City streets — beginning with a yearlong ban on issuing new licenses for most for-hire cars.
The move comes three years after a similar effort to limit the ride-hailing apps in the name of congestion. It was pushed by Mayor de Blasio, viewed skeptically in the Council and failed in the summer of 2015 in the face of aggressive push back from Uber.
But calls for restrictions on the companies have grown in recent months, as studies have borne out that the cars — often driving without passengers — have indeed increased congestion. Perhaps more stark has been the reckoning of the services’ impact on the city’s old-fashioned taxi and livery industry, and on drivers who spent their entire fortunes or mortgaged their homes to buy taxi medallions, only to see them plummet in price. Six struggling drivers have killed themselves this year.
Council Speaker Corey Johnson (D-Manhattan) said the Council’s package of bills aimed to create fairness between the various kinds of taxis in the city, to support drivers who work for all those kinds of taxis, to combat congestion and increase accessibility for the disabled.
"We aren't taking away any service that is currently being offered to New Yorkers,” he said. "We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without an appropriate check."
But Uber, as it did in 2015, promptly mobilized against the effort — rolling out a seven-figure television ad buy targeting the bills, in addition to ads on social media and elsewhere. That’s on top of a prior ad buy of more than $1 million for a campaign dubbed “Uber’s There.”
And the company will directly reach out to its millions of New York users by email, it said, a strategy that paid dividends three years ago.
“The New York City Council has proposed a series of bills that could make Uber more expensive and less reliable throughout the five boroughs — severely impacting those who rely on Uber when public transit isn’t an option,” the e-mail, shared with the News, will read.
The message includes a link allowing riders to “tweet to the City Council.” Sure enough, tweets started appearing online — some using the exact same language and the hashtag #DontStrandNYC.
The direct outreach went even further: Uber appears to be reaching out to New Yorkers by phone about the legislation, according to one source who received a call. The caller even tried to connect the source directly to their City Council member’s office, though the source noted the caller had the wrong district.
Lyft also pushed back against the cuts, arguing the city was fighting not for small-time medallion owners but “corporate” ones and misplacing blame for congestion.
“I think to put the blame squarely on ridesharing companies for that misses the point - there’s many studies that show ridesharing is not the cause of increased congestion,” Lyft communications director Adrian Durbin said.
Durbin, like his counterparts at Uber, argued the cap would make drivers head to the most lucrative area — Manhattan’s central business district, which would hurt outer borough riders and worsen congestion.
And the yearlong ban means the service will be unable to replace any driver who departs, he said.
But the bill does allow for the TLC to add new licenses if they don’t believe it will impact traffic — and it contains a carve-out allowing new licenses for wheelchair accessible cars.
"If any of these companies, like Uber, want to put a new wheelchair accessible vehicle on the road, they can do that,” Johnson said.
Medallion owners cheered the effort.
“In the last few years, Uber and other ride share companies have congested Manhattan streets, deprived passengers in wheelchairs from receiving meaningful service and decimated the lives of immigrant taxi drivers and their families,” the Metropolitan Taxicab Board of Trade said in a statement.
The board said the legislation was overdue but a “meaningful start” and urged the Council to pass them quickly.
De Blasio has long offered support for a cap on the services, and has repeatedly returned to the idea in discussing the driver suicides.
“As far as I can see this proposed legislation is addressing some really serious issues in a smart way, and I look forward to looking at it and I think the Council is trying to do something important here,” he said Friday.
While the last attempt to cap Uber went down in flames in the Council amid opposition, Johnson said that after drivers died by suicide, people have recognized it’s time to action.
"We are really just doing what we think is the right thing to do,” he said. “If that means that they're going to launch ads and campaign, I think it's our duty as elected officials to explain why we're doing this and to be able to explain that to the public on why we think this is a good public policy decision."
The bill to bar new licenses for a year is sponsored by Councilman Stephen Levin (D-Brooklyn).
"There's been an average 2,000 new vehicles added to the streets every single month,” Levin said. “At this point, it's pretty well-saturated, if not over saturated."
Council staff characterized the bill as a pause, not a cap — but the pause is intended to allow for a study of the impact of those vehicles and, after the study, to allow the TLC to cap new licenses if necessary. The TLC would also be able to set a “vehicle utilization standard” for the industry, aimed at regulating how often the cars are plying the city streets empty.
Another bill, sponsored by Councilman Ruben Diaz Sr. (D-Bronx) — who has been showered in taxi industry donations and leads a new committee on the subject — would require a new license for companies handling more than 10,000 trips a day. That would apply to the big names in ride-sharing, like Uber, Lyft, Via and Juno. The cost would be set by the TLC. Other bills from Diaz Sr. would waive license fees for wheelchair-accessible cars, and lower fines on livery drivers caught picking up street hails.
The bill aimed at driver pay, sponsored by Councilman Brad Lander (D-Brooklyn) would require the TLC to set a minimum payment for drivers and would also allow them to study whether to should set a minimum fare.
Copyright 2018 New York Daily News. All rights reserved.
Arizona Supreme Court Decides Statute of Limitation runs from the date of first uncured missed payment
Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ Supreme Court, 7-27-18) Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.
Decision:
Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2). We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.
History:
Santos moved for summary judgment, arguing that the claim was barred by the six-year statute of limitations applicable to credit-card debt under § 12-548(A)(2). Santos maintained that the Bank’s cause of action to recover the entire debt accrued after the first missed payment in February 2008. Mertola countered that a missed payment gives the creditor the right to sue only for that payment. According to Mertola, the cause of action for the entire debt could not accrue until the creditor accelerated the debt. The superior court granted Santos’s motion, finding that “all of the breaches” alleged by Mertola “occurred more than six years prior” to it filing this action.
The Arizona Supreme Court reversed a very bad court of appeals decision.
The court of appeals reversed, agreeing with Mertola that Santos’s missed payments, by themselves, gave the creditor the right to sue only for those payments. Mertola, LLC v. Santos, 241 Ariz. 572, 574 ¶8, 575¶ 13 (App. 2017). The Arizona Supreme Court reversed this very bad decision (yea for them).
What if borrower cures the missing payments?
Consistent with our decision in Gust, Rosenfeld, we hold that when a credit-card contract contains an optional acceleration clause, a cause of action to collect the entire outstanding debt accrues upon default: that is, when the debtor first fails to make a full, agreed-to minimum monthly payment. Accord Taylor v. First Resolution Inv. Corp., 72 N.E.3d 573, 588 (Ohio 2016). This rule will encourage creditors to promptly begin their collection efforts and protects debtors from stale claims. See Navy Fed., 187 Ariz. at 495 (acknowledging the incentive to begin collection efforts when a cause of action accrues at default). But, as we held in Browne, a debtor may cure a default if the creditor accepts a payment of arrearages that brings the account current consistent with the parties’ contract. 117 Ariz. at 75. By allowing the debtor to cure the default, the creditor relinquishes its pending cause of action to collect the debt, and the statute of limitations commences only upon a new default. Partial repayment, however, does not cure the default or reset the limitations period.
Click here to read full decision….
Additional reading on this or similar topics:
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News outlets are starting to report that real estate values may be beginning to drop. ” ‘Anything goes’ list-price strategy no longer working,” says a headline in CNBC news.
Sales of all homes — new and existing — fell in June to the lowest level since last year. Mortgage applications have fallen, and so has construction of single family homes.
Whereas sellers were seeing ten to fifteen offers at the beginning of this year, that number is dropping to about half of that, realtors say.
Continue reading
The Fair Credit Reporting Act “FCRA” and the Bankruptcy Code
The Automatic Stay v. the Bankruptcy Discharge
The Fair Credit Reporting Act “FCRA” and the Bankruptcy Code deal with debt differently and this difference can become confusing for everyone, including experienced bankruptcy attorneys. For instance, the legal status of a debt changes as a bankruptcy moves to conclusion. At the beginning of a bankruptcy the automatic stay stops most creditors seizing assets from the bankruptcy estate’s assets without an order from the Bankruptcy Court. But the debt is still the same as before the bankruptcy was filed. If the case is dismissed the creditor has all the same rights as before the bankruptcy was filed. Reporting the debt to the credit bureaus has raised lots of issues in bankruptcy. Many courts have found there is no liability under the FCRA to report a debt as being in default, at least until the case is discharged.
An order discharging the debt alters the legal nature of the debt and prohibits collection efforts.
Once the order of discharge is entered it “operates as an injunction against the commencement or continuation of an action … to collect, recover or offset any such debt as a personal liability of the debtor.” Therefore, a discharge order (unlike the automatic stay) alters the legal nature of the debt. Many courts have interpreted the FCRA to require credit reporting agencies “CRA” and furnishers to adjust credit reports after an order of discharge, otherwise be liable under the FCRA (not all courts follow this line of thought).
Reorganizations
Plans of reorganization are a key component of Chapter 11 and 13 cases. In order for a reorganization to be successful a plan must be confirmed and completed. The challenge for the courts is to determine how the debts should be reported on a credit report before completion of the plan. The order confirming the plan binds the debtor and creditors to the plan’s provisions, and controls any contracts that existed before the bankruptcy was filed, including the amount to be paid and lien priority. Once the plan is confirmed the United States Supreme Court determined that creditors may not relitigate their treatment under the plan (basically they already had their shot at the apple). Although confirmation binds the parties to the plan’s terms, it does so only as long as the case is active and is subsequently discharged.
If a case is dismissed the debts return to the same position as before the bankruptcy was filed, offset by any monies the creditors received during the case.
Given that the bankruptcy is not completed until discharge this raises the issue of whether a credit report can be determined to be inaccurate or misleading if it discloses the pre-petition debt after the bankruptcy court confirms a plan reducing the amount to be paid on the claim, or if it must report the amount established by the confirmed plan (not yet discharged). You can see the quandary.
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Most Tenants Facing Foreclosure Now Have Some Protection, at Least for 90 Days
On May 24, 2018 a permanent extension of the “Protecting Tenants at Foreclosure Act” (PTFA) was signed into federal law. The PTFA enables renters whose homes were in foreclosure to remain in their homes for at least 90 days or for the term of their lease, whichever is greater.
The PTFA, enacted in 2009 and originally expired at the end of 2014, was the only federal protection for renters living in foreclosed properties. During the financial crisis, bad faith and fraudulent lending, coupled with falling home prices and high unemployment, resulted in an astronomical high number of foreclosures in the U.S.
Renters lose their homes when the owner of the home they are renting goes into foreclosure.
The impact of these foreclosures was not limited to homeowners, however; renters lose their homes every day when the owner of the home they are renting goes into foreclosure. Unlike homeowners who know that a foreclosure is coming, renters are completely unaware. Yet, they continued to pay rent while the homeowner was not paying their lenders. Many renters can be evicted within a few days of the completion of the foreclosure.
The PTFA gives most renters at least to 90 days’ notice before being required to move after a foreclosure.
Under PTFA, tenants with Section 8 housing choice voucher assistance have additional protections allowing them to retain their Section 8 lease and requiring the successor-in-interest to assume the housing assistance payment contract associated with that lease.
The law applies in cases of both judicial and nonjudicial foreclosures.
The PTFA applies to all foreclosures on all residential properties; traditional one-unit single family homes are covered, as are multi-unit properties. Tenants with lease rights of any kind, including month-to-month leases or leases terminable at will, are protected as long as the tenancy is in effect as of the date of the completion of the foreclosure.
The PTFA applies in all states but does not override more protective state laws. Read more…
For more information about the PTFA, see: https://bit.ly/2L55LbE
Some other articles: Protecting Tenants, Arizona law
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Learn more about how Bankruptcy works and what you need to know.