Matco Tools & TD Bank worked together to scam Matco franchise owners, the Small Business Administration (SBA) and American taxpayers, according to a class action franchise lawsuit filed by Marks & Klein, LLP of Red Bank, N.J. yesterday.
The press release issued by Marks & Klein, LLP is included below.
UnhappyFranchisee.com intends to follow this case and other allegations against Matco as they unfold.
If you are familiar with the Matco Tools franchise or distributorship programs, please share your insights or opinions with a comment below.
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.
Also read: MATCO TOOLS Franchise Complaints.
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Marks & Klein franchise lawsuit press release:
Father & Son File Lawsuit Against Matco Tools and TD Bank
Class Action Lawsuit Claims the Tool Company and Bank Engaged in Widespread SBA Loan Fraud
TRENTON – A father and son – David Villano, Jr. and David Villano III, through their attorneys, Marks & Klein, LLP of Red Bank, N.J., today filed a class action lawsuit against TD Bank and Matco Tools, Inc. alleging 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.
The scheme enabled Matco to sell more franchises and TD Bank to make risky loans without concern. The bank knew if the loans failed, the loans would ultimately be repaid by United States taxpayers through the SBA guaranteed loan program. Data from the SBA shows that from 2000 to 2010, Matco Tools’ SBA loans had a staggering 37.3 percent failure rate.
“It is most unfortunate that SBA loans, which are designed to assist aspiring entrepreneurs to finance a new business venture and benefit the economy could, as alleged in this case, be used for such deceitful purposes,” said Gerald A. (Jerry) Marks, Esq., lead plaintiff counsel.
“Many individuals like the Villanos have unknowingly been exploited,” Marks said. “We are seeking treble damages to discourage this sort of conduct from happening again in the future. United States taxpayers have unwittingly been `bailing out’ lenders like TD for years on defaulted loans that should never have been made in the first place.”
The lawsuit alleges that Matco and TD conspired to make loans using secret three-year income projections, in violation of FTC franchise disclosure regulations. Specifically, 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.
The lawsuit further states that Matco, TD Bank and other unscrupulous SBA lenders preyed upon the Villanos and other 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.”
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View Comments
While these guys are boasting of Matco and what they did with a TOTALLY different AGREEMENT. The AGREEMENT Matco is selling these days, is in most cases, an unviable route to begin with. PRE-DEFINED list of BULLSHIT! Then when the New Distributor can't keep up with the above guys who have retired on purchase average because of their separate AGREEMENT. Matco says CHURN ON and hires another Distributor to take their place.
Think about it! A company that LIES in their advertising. Uses illegal web sites to advertise their Franchises as an Employment Opportunity because word of mouth IS NOT WORKING ANYMORE!!!
I was a Matco tools distributor for 10.5 years. Then I was forced out do to my purchase avarege below 80% of the national avarege.
Sal,
Defend your rights! Look me up on face book Todd Peterson. Wearing a softball uniform. Red and White. Leave me your Phone # and I will call you and tell you what to do. DO NOT let Matco continue this crap with others. They have a MASSIVE Ad campaign trying to APPEAL their Franchise CRAP to our VETERAN's coming home from OVERSEAS! We got plenty of seats on our train and if we get to full we will add more cars. Matco will PAY for the lives they have ruined.
Is it me or do some people need to relize they need to move on? This game is won by those who figure out how to play it. Mistakes you will make .poor guidance may occur but ultimately it is you that needs to figure it out. some of my BEST customers are wash help ,service writers hell even used car salesmen/women. so your head count may be low FIGURE IT OUT. so u have a ton of miles to drive FIGURE IT OUT (shaved 50 just by rearranging) so tired of oooo boohooo whoa is me. everyday is a new battle what did you think owning a biz was about?
I certainly understand the frustration of a business that sadly didn't work out. But Danaher is too well-run a company to allow Matco Tools to operate illegally, and frankly, Matco corporate management isn't going to do that either.
A franchise is not a guarantee of anything. You have to do your due diligence. Life in the US is "buyer beware", that's part of our freedom. I see a lot of intense feelings here being vented, but ultimately the anger will not go anywhere, or for some it will turn into a class action lawsuit where you get chump change and the law firm keeps 60% of $20 million. Given that how Matco is operating is legal, why are you letting Congress off the hook on this? Change the regulations! If you direct your rage at your representatives you can make a permanent change to the issues you see working against you.
My name is Dennis Milashouskas and I have owned and operated my own business for over 20 years. My business has me traveling a great deal. I was looking for something locally and there was a Matco route available right in my neighborhood! I actually bought the route that one of the parties involved in the class action suit Dave Vilano used to own. I am separated from Matco now and owe 100,000 that I don't have. If anyone has any advise I would appreciate the help.
Hello, Dennis ( & all others...)
Sorry to hear of your troubles with Matco.
My firm, Bridge Management Consulting, helps small business owners who are struggling with overwhelming debt resulting from a failing or closed business.
We’ve handled several franchisees who need to get out of their particular franchise hell, and we’ve successfully fought back on behalf of our clients. Don’t give into them!
Feel free to contact:
Ryan Lineham, Director of Client Services
401-390-3800
ryan@bridgemgt.com
I was a matco distributor. Matco has a financial sheet completed by the DM and potential investor. They base the break even on a number that's impossible to obtain. Its based the number of days you can work per year. Marco assumes the investor will work 51 weeks a year which drives down the BE and makes the biz seem appealing. Please look into the way break evens are calculated. They are all over stated.