🚗 Trust But Verify: The Tricolor Lesson Every Subprime Car Title Lender Should Learn
By Jer, theBusinessOfLending.com
Street-smart
lending insights for real-world lenders
👋 Hey Friends, Jer Here
If you’ve been in the car title or subprime lending world for a while, you already know the golden rule:
💬 “You don’t make money on the loan you make; you make money on the
loan you get paid back.”
But when markets are hot, even veterans forget that rule. That’s exactly what happened to Tricolor, a Texas-based used-car lender that catered to Hispanic subprime borrowers. They had all the buzzwords: AI underwriting, asset-backed securitizations, and Wall Street funding.
Then, in September 2025, they went bankrupt.
⚙️ The Big Mistake — Trusting Data, Not the Metal
Tricolor’s downfall wasn’t just about rising delinquencies or falling used-car prices. The deeper issue was
verification.
According to Bloomberg and Frank Tian, some of their loans were backed by duplicated or unverified VINs, cars pledged multiple times or missing proper title proof.
Their warehouse lenders and ABS trustees relied on self-reported data, fragmented DMV systems, and automated processes designed for speed, not accuracy.
When the bubble tightened, it all unraveled.
🧠 They trusted the data tape. But they didn’t verify the steel.
💡 Why It Matters to Title Lenders
If you’re running a subprime or title loan shop, this story should hit close to home. Fast growth, high LTVs, and long terms can make your portfolio look strong until you realize some of your collateral isn’t worth the ink on the lien.
Your real edge isn’t pricing risk, it’s verifying collateral. Even small lenders can adopt the discipline
the big players ignored:
✅ Run VIN-level audits. Old-school eyeball checks still matter.
✅ Perfect every lien. Confirm title release and DMV filings personally.
✅ Use independent custodians. When
scaling, don’t rely solely on internal data.
When markets tighten, verified paper gets funded. The rest gets fire-sold.
🧭 3 Takeaways for Car Title & Subprime Lenders
- Speed kills without control. Automation should support — not
replace — your verification process.
- Every VIN is a promise. Re-check your titles, especially repeat borrowers or dealer-originated paper.
- Process discipline wins. Checklists, lien logs, and custody reports may seem boring — until they save your book.
📘 Jer’s Note — Want to Go Deeper?
If this lesson hit home, my eBook dives even further:
