Reagor-Dykes Files Chapter 11 After Ford Credit Calls Debts Due

Federal Court documents filed on July 31 reveal that Ford Motor Credit Company is suing local Lubbock car dealership, Reagor-Dykes. The lawsuit names multiple Reagor-Dykes locations and owners, Bart Reagor and Rick Dykes. The credit company alleges that the dealership has an outstanding balance of more than $116 million, with more than $40 million due now.

Ford Motor Credit Company is the financial arm of Ford Motor Company. The business offers to finance for consumers as well as supplying inventory and leasing vehicles to dealerships like Reagor-Dykes.  

Ford Credit sought a restraining order to protect against further sale of vehicles, or collateral, on loan in Reagor-Dykes’ inventory. The company says that a surprise audit in June found that 147 of the 150 Reagor-Dykes’ reported sales did not match the sales or registration dates reported by the Texas DMV. Further, the company alleges that vehicles were not paid off by the dealership until an average of 55 days after the sale date.

What does Ford Credit’s Lawsuit against Reagor-Dykes Allege?

The lawsuit against Reagor-Dykes makes several big claims. First, the suit alleges that the dealership borrowed money from Ford Credit to purchase inventory, but failed to repay the money to the lender within a certain time frame or at all. The suit further alleges that on 15 different occasions, the dealership transferred vehicles from one dealership to another, then after the vehicle was sold, floor planned the vehicle with Ford Credit even though it was no longer in inventory. This means that the dealership obtained financing payments from Ford Credit under false pretenses.

In addition to these claims, Ford Credit also points to instances where the Reagor-Dykes dealership submitted information to secure floor plan financing on a vehicle at one dealership. The company then did so again at a different dealership for the same vehicle—obtaining double financing from Ford Credit. This is illegal.

The suit further alleges that the Reagor-Dykes dealerships have:

• Sold Ford Credit vehicles without paying for the loan on the vehicles;
• Repeatedly submitted false and inaccurate information to Ford Credit and its representatives;
• Is in default for financing and security agreements with Ford Credit;
• Failed to cure their defaults despite of the opportunity to do so;
• Refused to voluntarily surrender vehicles in their possession

Reagor-Dykes disputes that it owes Ford Credit more than $40 million. However, based on the alleged default, Ford is no longer funding loans to the dealership.

How did Reagor-Dykes Respond to Ford Credit’s Lawsuit?

In response to Ford Credit’s lawsuit, Reagor-Dykes filed for Chapter 11 bankruptcy in several of its locations in Lubbock, Amarillo and other locations on Aug. 1. The following day, the company filed an emergency motion to use cash to be able to pay their employees and other day-to-day expenses. The emergency motion also provided for a purchase of inventory.

In its motion, the dealership says that it has taken profits and invested them in accounts with American Century Investments. It wanted the court to allow it to move money into their newly opened Debtor-in-Possession (DIP) accounts. The company does not believe these proceeds are encumbered by the security interest of Ford Credit.

On Aug. 3, Reagor-Dykes issued a statement saying that all locations would be open for business on Monday, Aug. 6. However, when it was time for business to open, there were several locations where the doors remained closed.

Reagor-Dykes will be back in Bankruptcy Court on Aug. 16.

How does Ford Credit’s Lawsuit against Reagor-Dykes Affect Consumers?

It is possible that Reagor-Dykes will be on the hook for deceptive trade practices. Customers allege that they are now receiving bills for both their trade-ins and new vehicles after the dealership failed to pay off loans for trade-in vehicles.

Texas consumers are protected under the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA). The DTPA protect consumers from false, misleading and deceptive business practices.

What should I do if I traded-in a vehicle and purchased my new car through Reagor-Dykes?

While the company is still in business, those who have purchased a vehicle through the company need to make sure their titles have been transferred. This is particularly important for any trade-in vehicle that you did not pay off. Contact your lender to ensure that your vehicle has been paid off. If the note has not been paid off, your lender will know how to deal with this situation.

If you or someone you know received two car note bills in the past month, contact The Carlson Law Firm. We offer free consultations and are available for you 24/7. We can help you figure out your next steps.

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