A Dallas subprime auto lender’s sudden collapse under more than $1 billion in liabilities has upended lives, shuttering 60 locations, idling 1,000 employees, and stranding 100,000 borrowers amid soaring industry delinquencies.
Delinquency Surge Grips Subprime Market
Subprime auto loans face mounting pressure, with 6.43% of borrowers at least 60 days past due by the second quarter of 2024. This rate surpasses levels from the COVID-19 pandemic, Great Recession, and dot-com bust, signaling deep cracks in the sector.
Late payments have climbed as subprime balances reach record highs, with delinquencies totaling $60 billion. The 16.7% subprime share of auto loans holds steady, but lenders now scrutinize high-risk models more closely. Banks grow wary, tightening credit and exposing broader economic risks.
Rapid Expansion Masks Vulnerabilities
Tricolor Holdings, a Dallas-based firm, surged to become one of the largest independent used-car chains by offering no-credit loans to Hispanic immigrants. This strategy drove fast growth but relied on high-risk borrowers, building an unstable foundation.
Internal audits in August 2025 uncovered loan data flaws, including mismatched collateral and dubious practices. Major funders like JPMorgan Chase and Fifth Third Bancorp intensified reviews as fraud suspicions grew, eroding the company’s operations.
Fraud Exposed and Leadership Charged
Prosecutors detailed how Tricolor inflated its books by over-pledging collateral, claiming $2.2 billion in assets while holding just $1.4 billion—an $800 million gap. A 2025 audit revealed the scheme, which propped up expansion until it unraveled.
Founder Daniel Chu and COO David Goodgame face federal fraud charges for double-pledging assets. Former CFO Jerome Kollar has pleaded guilty and is cooperating. Conviction could bring life sentences. On September 10, 2025, Tricolor filed for Chapter 7 liquidation days after closing all sites.
Liquidation Chaos Hits Borrowers and Banks
Trustee Anne Elizabeth Burns now oversees 10,000 vehicles for sale by March 2026, with no new loans or hires permitted. Loan servicer Vervent grapples with 100,000 accounts, title disputes, and transitions.
In Dallas and Houston, abrupt shutdowns halted sales and service. Borrowers, many low-income immigrants, report wrongful repossessions, drawing Texas DMV scrutiny. Banks tally heavy hits: JPMorgan wrote off $170 million, Fifth Third faces $170-200 million in losses, and others like Origin Bank and Barclays push total exposures past $370 million.
Workers, placed on unpaid leave beforehand, rank as unsecured creditors, fueling outrage. Legal fights escalate over asset recovery and competing liens.
Wider Ripples and Regulatory Shift
Tricolor’s fall reverberates globally, with traders offloading subprime securities and investors stung. Experts like restructuring attorney Tom Califano label it the “quickest meltdown ever.” JPMorgan CEO Jamie Dimon flags potential sector-wide perils.
U.S. Attorney Jay Clayton notes fraud will constrict future auto loans for vulnerable groups. Federal probes by the DOJ and SEC intensify, spurring demands for stricter rules on subprime and warehouse lending. Immigrant communities, targeted by Tricolor’s practices, see eroded trust.
This episode evokes 2008’s housing meltdown—fraud, over-leveraging, low-income fallout—though smaller. As delinquencies climb and scrutiny rises, the subprime auto industry’s sustainability hangs in balance, with tighter credit poised to limit options for millions and test other players’ resilience.
Sources:
“CEO, CFO, COO Charged In Connection With Billion-Dollar Collapse of Tricolor Auto.” U.S. Department of Justice, U.S. Attorney’s Office, Southern District of New York, 16 Dec 2025.
“Auto dealer Tricolor files for bankruptcy, moves to liquidate.” Reuters, 10 Sep 2025.
“JPMorgan takes $170M charge-off on Tricolor ties.” Banking Dive, 13 Oct 2025.
“Auto Loan Delinquencies Hit 15-Year High.” Bankrate, 4 Dec 2025.