Consumers who obtained vehicles through the Lubbock, Texas-based dealership chain, which filed for Chapter 11 bankruptcy protection in August, were unable to properly register their new vehicles.
“Most retail lenders will finance tax, title, and license fees, and will trust the dealer will pay those fees,” Jim Houston, senior director of automotive finance practice at J.D. Power, told Auto Finance News.
After Reagor Dykes filed for bankruptcy protection, the millions of dollars’ worth of checks it had drawn on local banks bounced, leaving customers with unpaid TT&L fees.
Per TD Auto’s agreement, the bank will provide vehicle information for Reagor Dykes to pass along to the Texas Department of Motor Vehicles to determine the total amount of unpaid TT&L costs.
Once the information is validated, TD Auto will pay within five business days.
“When a dealer goes bust, all their lender partners get hurt,” Houston said. “The lender then files a claim against the dealer.”
Ford Motor Credit Co. sued Reagor Dykes for $41 million in July, claiming that the chain and its owners defaulted on floorplan financing agreements by delaying payments on sold cars and falsifying records to obtain extra loans.
On Nov. 2, five more Reagor Dykes dealerships filed for bankruptcy, bringing the total to 11. The dealership group operates 14 dealerships in Texas.