Matco Tools, TD Bank Franchise Class Action Lawsuit: Something Screwy?

Ahh, but you ask, wouldn’t the bank have raised a red flag or denied the loan? Well, here’s the thing—small business loans are granted by SBA-approved lenders who in turn receive an SBA guarantee on the loan in the event of default. Bottom line: if the loan then defaults, the lending bank can recoup its losses up to the amount of the SBA guarantee. Not a bad deal, eh?

And for Matco, the allegations would mean they could simply re-sell the franchise once the initial franchisee defaulted.

http://www.lawyersandsettlements.com
December 6, 2011

Matco Tools, TD Bank Franchise Class Action Lawsuit: Something Screwy?

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Here’s a scenario: it’s 2008. You’ve lost your job. The economy sucks. Jobs are few. You’d love to be in business for yourself—if only the right opportunity were there. And there it is—bingo! A Matco Tools franchise!

Franchising has always had its allure—just invest upfront, play by the rules, and watch the money roll in. Sounds like a no-brainer. Assuming the franchise is a successful one.

And therein lies the rub of the Matco Tools class action lawsuit that’s been filed. TD Bank’s also in on this one—as a defendant.

The lawsuit, filed by David Villano III and his father, David Villano, Jr., alleges that Matco Tools and TD Bank (Commerce Bank at the time—TD Bank has since acquired Commerce) conspired to make Matco Tools franchise opportunities appear a bit rosier than perhaps they really are. The idea, the lawsuit claims, was that by inflating the appearance of Matco’s annual performance projections, lenders would approve small business loans, allowing the sale of the franchise to the franchisee.

Only thing was, the class action lawsuit claims, that the soon-to-be-franchisees weren’t shown those inflated projections—and so they received their loans and set off to start what they thought was a viable business. Hell, if the bank loaned the money, it must be viable, right? However, according to the lawsuit, that business was destined to fail and the money never should’ve been lent in the first place. Financial fraud? Where have we heard that before…?

According to an article that ran in the New York Post a while back, loans to Matco franchisees had a default rate of 37 percent in 2004. That compares to an eleven-year average Small Business Administration (SBA) loan default rate of 11.64% according to a study done by the Coleman Report. Something seem a bit screwy? (forgive the tool pun…)

Ahh, but you ask, wouldn’t the bank have raised a red flag or denied the loan? Well, here’s the thing—small business loans are granted by SBA-approved lenders who in turn receive an SBA guarantee on the loan in the event of default. Bottom line: if the loan then defaults, the lending bank can recoup its losses up to the amount of the SBA guarantee. Not a bad deal, eh?

And for Matco, the allegations would mean they could simply re-sell the franchise once the initial franchisee defaulted.

So, the bank would allegedly reap the interest paid on the loan prior to default—with minimal risk, and Matco would allegedly get to basically flip its franchises.

And, if you’re one of those franchisees caught in the middle of it all, that just might make you flippin’ mad.

So franchise, business and estate attorneys Marks & Klein are representing the plaintiffs, and the class action has been filed. Stay tuned.

Comments

1. GUEST
Most definitely stay away from the professional liars and manipulators in Matco Tools management, they will present you with a phenominal business opportunity and send you on test rides with only top Franchisees with full trucks who tow the company line. The tools are definitely one cool aspect of the business however the tool business has changed radically since the advent of Franchising. You do not own your own business with this concept and can/will be terminated for any reason the company chooses. THIS IS NOT A FRANCHISEE FRIENDLY COMPANY.
Ask the management how many Franchisees started in the last 10 years versus how are left after 10 years, the number is AN ASTOUNDING 90% are gone!! They will only quote 1 years worth of attrition with plenty of excuses minimizing fault on their end.
Plain and simple Matco Tools is running a "churning" operation, they suck you in, fleece you for 2-4 years then discard you and on to the next victim.

2. DISTRIBUTOR
I AGREE!! This is one to stay far far far away from. My Matco's own documents - they boast of a 47% new distributor failure rate - unbelievable.
LIES, If you want to throw away $100,000, your good credit, your marriage, and your dream to own a small business - then invest
BE SMART - the smart RUN

3. richard brannies
how can matco have it where people can establish their own account with matco and their distributors name is optional. isnt that like selling in someone elses area. its just okay for matco to do. thats not right

4. FORMER
THEY WILL SELL YOU A DREAM, YOU WILL NEVER ACHIEVE. DO NOT RUIN YOUR LIFE OR YOUR LIFES SAVINGS. TELL THEM, NO THANKS.

THEY CHOOSE WHO THEY WANT TO SUCCEED AND MORE PEOPLE FAIL THAN SUCCEED.

5. Churned & Burned
Stay away from these corporate vampires ! They paint a rosy picture in the beginning and set you up to fail, they even hope you do fail because it means a new source of capital. New loan, new interest, new starter inventory. You will be thrown out owing thousands to Matco, bankrupt, broke, and depressed.

6. Rocky
I lost (walked away) after many failed promises of making a ok living. My buisness failed because of the lack of support from Matco. When I wanted help they offered to help at a substantial cost when I was still owing the initial inventory and trying to make the truck payment. Small route area, poor D.M. support and too many unhappy fellow distributors caused my buisness to fail. Monthly meetings were a joke, all they did was push harder to purchase more and sell cheap with very small profit margins. Class action? Iam in!

7. DEBBIE SOLKO
MATCO TOOLS IS BAD BUSINESS!!!!!!!!!

Matco 'churns' distributors, franchise fraud, multiple lawsuits! You probably won't get another distributor, if you do, won't last long…..

GilmoreLIES http://www.youtube.com/watch?v=Prdw4CKSX7E
A recruiting video for Matco Tools quotes a US Department of Commerce study that NEVER existed.

TOO BAD MATCO TREATS THEIR DISTRIBUTORS SO POORLY

8. Todd Peterson
Matco used fraud, lies, spyware and false documents to steal my successful Franchise and left me with less than 325 customers after they did it! Then I was promised a route resurvey by my District Manager twice in 2009 after I cited low head count as a problem with my Franchise and being profitable and it was never done. Matco let my Franchise die out slowly losing over 50% of my customers to shop reductions and closures. I do not recommend this Franchise to anyone and ask any MILITARY SOLDIERS to do their homework before starting a Franchise. Read the UFOC front to back! If you do it you will see that it in itself is a CROOKED AGREEMENT although the people selling it will swear that they will treat you right and you have nothing to worry about! Run FROM THIS SCAM!!!

9. Tony
Same story here Rocky. Everything you said, but dont forget that Matco expects you to take on the added risk of financing your customers who cant qualify for Matco Financing. So in a depressed economy, you are forced into making loans to people who otherwise couldnt get a cup of coffee on credit, and when they get fired or quit, they leave you holding the bag on the debt. No help from Matco there. Oh sure, you can try to go after the guys with collections companies. Where you MIGHT see a 5% return.

http://www.lawyersandsettlements.com/blog/matco-tools-td-bank-franchise-class-action-lawsuit-something-screwy-09151.html


Risks: Able to finance and sell negative cash flow franchise on crooked appraisals, Liar Loans, American Dream, Bank fraud, Bankruptcy was inevitable the moment the contract was signed, Bankruptcy, first the company and then you personally, Banks, Banks allegedly mastermind fraud, Banks collude, Broken relationships, ruined lives and alienated children, Churning (serial reselling), Class action lawsuits benefit lawyers, not franchisees, Class action only as good as the lawyers involved, Class-action lawsuits: lawyers take majority of risks & spoils, Clinical depression, Comments on article are interesting, Conspiracy, Company men, Conspiracy to commit fraud, Conspiracy to market and sell a doomed to failure franchise, Deceit, Fraud, Fraudster banker, Fraudster franchisor, Fraudulent misrepresentation, Government guaranteed loan program very attractive to fraud, Government guaranteed loans, Government guaranteed loans, massive loan defaults, Government guaranteed loans: program loses $1, franchisee families lose $10, House negro, Life savings gone, Loan pushing, Moral Hazard: a party insulated from risk behaves differently than if the full risk were present, No franchisor support, Nothing but cold calculation, Outright scam, Overstatement of sales and profits, Predatory franchise lending, Raining litigation, Resale or transfer store through franchisor to new franchisee, Resales (after termination) seen as a profit center, Symbiotic relationships (industry, banks, lawyers), TD Canada Trust, The game is rigged, Unsophisticated buyers, U.S. Small Business Administration, SBA, Why should we care? It's not our money., United States, 20111206 Matco tools

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