Tricolor Trustee Seeks Control Over 100,000 Subprime Auto Loans Amid Fraud Probe

Tricolor Holdings, a subprime auto lender, has filed for bankruptcy with 100,000 auto loans under court supervision. The trustee is seeking control over the loans to determine how to distribute proceeds to creditors. Banks like JPMorgan and Barclays are bracing for losses, while investors have seen the value of their securities plunge. The US Justice Department is investigating allegations of fraud.

Tricolor Holdings, a subprime auto lender, has filed for Chapter 7 bankruptcy, seeking to liquidate its assets following allegations of fraud. The company, which specialized in lending to individuals with little to no credit history, has left 100,000 auto loans under court supervision. The trustee overseeing the bankruptcy is seeking control over these loans to determine how to distribute proceeds to creditors.

The sudden collapse of Tricolor has ensnared several major financial institutions, including JPMorgan Chase & Co. and Barclays Plc. These banks are bracing for potential losses, while investors who purchased asset-backed bonds issued by the company have seen the value of their securities plunge. Federal prosecutors are currently investigating the alleged fraud.

The trustee, Charles Gibbs, reported that it took nearly a week to gain access to Tricolor's headquarters. Lawyers are still working to gain full access to the business. The trustee is seeking approval for Vervent, a San Diego-based firm specializing in capital markets and loan servicing, to continue acting as the loan servicer. Vervent is expected to collect payments, handle repossessions, and oversee the administration of the car loans.

Tricolor has essentially no employees left, and Vervent has engaged with former Tricolor employees to assist with the transfer of servicing. The trustee has also disclosed that the US Justice Department is conducting two parallel investigations into Tricolor.

The number of Tricolor auto loans is larger than the number of vehicles with GPS-tracking units in circulation. As many as 100,000 auto loan customers are seeking guidance on where and how to make their payments.