Ford Motor Credit Co. sued a chain of Texas-based dealerships for $41 million, claiming the chain and its owners defaulted on financing agreements by delaying payments on sold cars and falsifying records to obtain extra loans, according to the federal court filing.
The captive filed the lawsuit against five dealerships — all under the name Reagor-Dykes and owned by Bart Reagor, chief executive, and Rick Dykes, owning partner. Ford Credit claims the dealerships have an outstanding balance of over $116 million, and currently owe more than $41 million.
Ford Credit names a number of issues with the dealership including that they sold vehicles without sending required payments and repeatedly submitted false or inaccurate information. Additionally, the dealerships are in default under their financing and security agreements and have not voluntarily surrendered collateral.
“Ford Credit has made repeated efforts to resolve this matter with the dealerships, short of filing the suit, but those efforts have failed,” the file notes. Additionally, the dealerships have not voluntarily surrendered collateral in their possession that is subject to Ford Credit’s security interests.
Court documents also note 15 instances where the dealership transferred sold vehicles from one dealership to another and would floor plan the vehicle through Ford Credit despite the vehicle no longer being in the inventory — obtaining financing payments under false pretenses.
“Ford Credit has every reason to believe that absent the intervention of this court, the dealership will continue to transfer, remove, or otherwise dispose of the collateral, all of which will result in substantial losses to Ford Credit,” the filing notes.
The suit can highlight the importance of dealer-lender relationships. Having “intimate” knowledge of the dealer base and “exceptional relationships” with those dealers is vital to lending practices, Doug Marohn, chief executive of subprime lender Nicholas Financial, previously told Auto Finance News. Lenders must maintain “extensive data” on its dealers and their performance in several key areas, he added.
Reagor-Dykes dealerships filed for bankruptcy for the locations in the lawsuit on August 1.2 - Readers Like This Post