Tricolor, a major subprime auto lender based in Irving, Texas, filed for bankruptcy on Wednesday (September 10) and plans to liquidate its assets. The company, which specializes in providing auto loans to buyers without social security numbers or credit histories, is going out of business amid allegations of significant fraud. The U.S. Department of Justice is investigating the matter.
Tricolor, operating through its brands Tricolor Auto, Ganas, and Ganas Ya, has provided over $5 billion in auto loans, primarily serving the Hispanic community across Texas, California, the Southwest, and Illinois. The company’s bankruptcy filing lists assets and liabilities between $1 billion and $10 billion, with over 25,000 creditors. Major banks, including JPMorgan Chase, Barclays, and Fifth Third Bank, are among Tricolor’s secured lenders. Fifth Third Bank recently discovered alleged fraud related to Tricolor’s asset-backed finance loan, with an outstanding balance of $200 million.
Tricolor’s bankruptcy could have ripple effects in the financial sector. According to Kelley Blue Book, the bankruptcy might lead to tighter lending standards for car loans as banks become more cautious about investing in potentially risky subprime auto loans. The subprime auto loan market, although smaller than the mortgage market, still represents a significant portion of the auto finance industry.
As the situation unfolds, Tricolor’s consumer-facing websites remain operational, but its main website is down. Attempts to reach Tricolor for comment have been unsuccessful, and the company has not provided any official statements regarding the bankruptcy or the fraud allegations.
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