A class action lawsuit against Matco Tools and TD Bank alleges that the tool company franchisor and the bank engaged in a loan fraud scheme to encourage unsophisticated borrowers to enter into risky business loans to buy Matco Tools franchises.
Here is a copy of the complaint brought by Marks & Klein, LLP, of Red Bank, New Jersey:
The lawsuit alleges that Matco and TD Bank conspired to make loans using secret three-year income projections, in violation of FTC franchise disclosure regulations. Specifically, it claims Matco would deliver the secret three-year income projections to TD Bank with a letter, instructing bank officials not to disclose the projections to loan applicants.
The bank would then use the income projections to qualify the loans for SBA financing. But Matco kept the projections secret because it knew of the high rate of failure among its franchisees and feared the lackluster projections would be used by failed franchisees filing suit.
UnhappyFranchisee.com has received a copy of the alleged secret three-year income projections Matco is said to have provided to TD Bank but did not furnish to prospective Matco Distributors. Click here for the alleged three year projections.
The lawsuit further states that Matco, TD Bank and other unscrupulous SBA lenders preyed upon unsophisticated borrowers because of their perception that the lender would not make the loan unless it believed the Matco franchise was an acceptable business opportunity.
According to the lawsuit, TD Bank profited through its collection of loan origination fees as well as interest on the loan principal, which it collected from borrowers while these improper loans were current. When the loans would ultimately fail, TD bank and other lenders would pass along the loss to the American taxpayer, as SBA loans are 90 percent guaranteed by taxpayers, according to the FDIC.
Matco, as the franchisor, would likewise profit from the sale of a new franchise and having its franchised distributors sell tool products for two to three years in a designated route, before ultimately failing and being replaced by a new franchisee.
“Matco and TD had the ability to perpetuate this scheme because of a self-serving lending culture that was more than happy to originate and collect fees and pass along the risk of loss to its customers and taxpayers, even if the law was being violated,” said Louis Tambaro, Esq., another member of Marks & Klein. “By bringing this lawsuit as a national class action, we look forward to exposing the dark underbelly of a destructive lending culture.”
Representatives of Matco Tools, TD Bank or others are invited to submit clarification, opposing opinions or rebuttals for publication. Contact the site ADMIN at UnhappyFranchisee[at]gmail.com.
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Also read: MATCO TOOLS Franchise Complaints.