New York, NY: A fraud class action lawsuit has been filed against Franchisor Matco Tools and TD Bank, by franchisees who allege that the tool company misrepresented the financial opportunities available to potential Matco Franchisees which resulted in business failures and small business loan defaults.
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 better than they really are. According to the lawsuit, the idea was that by inflating the appearance of Matco' annual performance projections, lenders would approve small business loans, allowing the sale of the franchise to the franchisee.
The lawsuit further claims that the soon-to-be-franchisees weren't shown those inflated projections. While the franchisees did receive their loans, the franchises was destined to fail, the lawsuit claims, and the money never should have been lent in the first place.
According to a recent article in the New York Post, 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.
