A bankruptcy court heard arguments both for and against making retail lenders to pay tax, title, license and trade-in liens on vehicles that customers purchased from Reagor Dykes in the days and weeks before August 1.
The bankruptcy judge on Thursday set another court date on the matter for October 29. Attorneys behind the scenes are negotiating a compromise, but it was far from ready on Thursday.
Court records indicate the amount of money in question is $6.5 million or more.
In September, the Texas Department of Motor Vehicles said in court records that customers had filed complaints because tax, title and license (TTL) had not been paid. That meant innocent customers could not register their vehicles.
Trade-in liens had also not been paid, and that meant that customers were getting payment demands for both their new vehicle as well as the vehicle they traded in.
Ordinarily, customers would take out a loan and pay Reagor Dykes. Reagor Dykes could then pay off the TTL and trade-in lien. But ordinary came to an abrupt halt on August 1 when Reagor Dykes filed for bankruptcy.
Reagor Dykes bounced millions of dollars of checks to local banks. That left the TTL and the liens unpaid.
Reagor Dykes, this month, filed a motion to force retail lenders to pay the TTL and trade-in liens. Ford Motor Credit Company and a few other retail lenders have been supportive, not all of them.
Arguably the strongest objection came from U.S. Bank which said in court records that it already put up the money for TTL and trade-ins when it lent money to customers. It shouldn’t have to pay twice.
“At best, the motion is an ill-conceived effort, without any legal support, to escape
responsibility,” U.S. Bank said.
U.S. Bank accused Reagor Dykes and Ford of a coordinated effort to take $6.5 million or more from banks by using and abusing the bankruptcy court. Ford previously claimed that Reagor Dykes defaulted on $40 million or more. It has a big interesting in preserving as much value in Reagor Dykes as possible.
U.S. Bank said it tried to pay for TTL directly to government agencies and bypass Reagor Dykes. But Reagor Dykes and its Chief Restructuring Office refused to provide information to make that possible, according to U.S. Bank’s court records.
“However, if [Reagor Dykes and its Chief Restructuring Officer] insist on administering these Bankruptcy Cases to the seemingly exclusive benefit of Ford Credit, then U.S. Bank and the other retail lenders cannot be expected to foot the bill,” U.S. Bank’s objection said.
General Motors said in its objection, “GM Financial is prepared to pay many of the TT&L Fees and direct payment by GM Financial will be the most expeditious resolution…” In other words, Reagor Dykes should not get another chance to misdirect the money.
GM also said the bankruptcy court should not order the removal of negative comments from customers’ credit reports. Several lenders said customers should use the normal procedures for removing negative credit comments.
Marcus Helt, the attorney for Reagor Dykes said in court Thursday, “While we didn’t reach an agreement with a majority of the lenders, we made a lot of positive steps in the right direction.”
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