Tricolor Holdings’ troubles continue to mount—with the subprime lender filing for bankruptcy on Wednesday as several major banks brace for steep losses tied to the company.
The details: A Bloomberg report indicates that JPMorgan Chase & Co., Fifth Third Bancorp, and Barclays Plc could be preparing for combined losses in the hundreds of millions from loans issued to Tricolor, according to a Tuesday regulatory filing by Fifth Third.
The bank disclosed an impairment charge of about $200 million after uncovering alleged fraudulent activity at a commercial borrower, which was not identified.
Lenders are reportedly investigating whether collateral for warehouse lines was double pledged, according to unnamed sources.
Fifth Third, which learned of the situation last week with a borrower using its warehouse facilities, is working with law enforcement on the matter.
According to Bloomberg, JPMorgan, Barclays, and Fifth Third have all served as warehouse lenders to Tricolor, which suspended its auto operations on Friday, fueling speculation that a bankruptcy filing was imminent.
What they’re saying: “…Based on our ongoing review, it appears there is significant fraud in the collateral filed that was used to support the borrowing base in all their warehouse facilities, as well as the audited financial statements of the company,” said Fifth Third Chief Executive Officer Tim Spence, via Bloomberg.
Why it matters: The fallout from Tricolor—exposing systemic vulnerabilities, regulatory lapses, and reputational risks for big banks—could tighten credit markets and deepen financial instability across auto retail.
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Between the lines: Tricolor has sold nearly $2 billion worth of asset-backed securities since 2022, many of which remain outstanding—anchoring a strategy that has put the company at the center of national policy debates.
The lender has focused on serving customers ineligible for social security numbers, drawing scrutiny earlier this year after President Trump vowed to crack down on illegal immigration.
Car buyers have been able to secure financing without a Social Security number or credit history.
Since its first deal in 2018, Tricolor’s lending has surged to about $1 billion of auto loans annually—nearly five times its 2020 volume.
Between the lines: The Tricolor collapse could be the canary in the coal mine for subprime auto lending. Stricter standards, higher borrowing costs, and tougher oversight of collateral and securitizations are likely ahead—meaning fewer loans and harsher terms for riskier borrowers, with ripple effects on used car sales and auto retailers.
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