Tricolor Fallout Fuels Boom in Business for Collateral Checkers
Misha Manjuran Oberoi and Paige Smith
Fri, August 21, 2026 at 12:00 PM GMT+3 4 min read
(Bloomberg) -- The fallout from last year's collapse of subprime auto lender Tricolor Holdings has spurred a boom for businesses that verify whether collateral exists and try to make sure it's not double pledged.
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Consulting firm Guidehouse said it has seen an 80% increase in demand for those services since then. Loan-servicing firm Vervent said inquiries about its own verification service have surged 50%, according to Chief Operating Officer Derek Gamble, while other firms including Setpoint Technologies and CBIZ Inc. also said they've seen a greater demand.
Pagaya Technologies Ltd., which functions as a network for three dozen lenders, made it mandatory for its auto-lending partners to sign up with a verification service in order to work with them, according to President Sanjiv Das.
The sudden downfall of Tricolor last year sent lenders on a chase after the company's remaining assets. Last year, US prosecutors charged Tricolor's founder with conspiring to defraud lenders, allegedly using methods including the double pledging of collateral for the loans.
Those allegations spooked lenders, leading to them to hunt for services to help them investigate collateral even more. Other companies have also run into trouble, including mortgage lender Market Financial Solutions Ltd. and First Brands Group, hurting their creditors. That's translated to an even busier time for executives running the verification firms.
Just weeks after Tricolor imploded last year, executives attending the ABS East conference at Miami Beach's Fontainebleau hotel swarmed Vervent's booth, barraging the firm's executives with questions about what the lenders could do to prevent future catastrophes.
"We literally were the most popular person at this giant conference down in Miami," Gamble said in an interview. "They were immediately like, 'That's crazy — should we be concerned? What can we do?'"
Higher Standards
A challenge brought up by Tricolor's saga was that it can be complicated to check one lender's collateral against another's. That becomes even trickier for lenders when, such as in Tricolor's case, there are instances of alleged fraud. According to federal prosecutors, a top lieutenant of Tricolor's founder was allegedly tasked with manipulating Excel data that the subprime auto lender regularly sent to its finance firms.
"The old attitude is you can't really protect against fraud," Bart Steenbergen, senior vice president of growth at Setpoint, said in an interview. "If somebody wants to do it, they'll find a way to do it."
Some practices are starting to change. Banks are increasingly seeking information about what other firms are lending to a borrower, Gamble said.
"Banks are talking to each other more on these transactions than they have in the past," he said. "So when they do diligence, they want to know very clearly who all the other lenders are on this."
Setpoint has also received more inquiries from lenders for information about assets that borrowers have pledged for debt from other firms. Late last year, the firm launched PledgeCheck, a verification tool that conducts automated collateral checks across lenders. SetPoint advertises it as a solution to prevent double pledging.
In the past, lenders sometimes would check a small sample of assets and then extrapolate results. Now, more companies are requesting to review borrowers' full lists, seeking more enhanced controls than before, according to Steenbergen. At Guidehouse, lenders are increasingly requesting more cash reconciliations, which can help monitor for potential fraud, Matt Moosariparambil, a financial-services partner at the firm, said in an interview.
"I think lenders are just adjusting what they are expecting from their borrowers to a higher standard," Steenbergen said.
In Pagaya's case, it was a private-credit client who first recommended the fintech sign up with CBIZ. Despite pushback from some lenders, Pagaya's policy has been in place for two months now, Das said.
"Your system is as strong as the weakest link," Das said. "We simply cannot run the process with a weak link."
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