NEW YORK, Aug. 27, 2026 /PRNewswire/ — Egan-Jones released a commentary examining the credit indicators that deteriorated well before the failure of subprime auto lender Tricolor Holdings, and how comparable warning signs can be recognized in other borrowers. The publication holds that the losses had precursors, several of them visible in public data.
In August, the U.S. Securities and Exchange Commission sued Tricolor’s founder and two of its executives, alleging that they pledged the same collateral more than once and misrepresented the debt pools they offered to lenders. For investors, instruments rated AAA and AA are in default, and recoveries at both Tricolor and First Brands Group are expected to be minimal. Egan-Jones rated neither company nor their securities.
One reading of the episode is that fraud made the collapse unforeseeable. Egan-Jones sets out the opposite position: fraud is a recurring feature of credit markets, and borrowers under strain frequently obscure their condition while attempting to trade through it. On that view, the useful exercise is identifying which indicators were available at the time.
Three of them moved against Tricolor at once. Delinquencies on consumer loans at commercial banks climbed from roughly 1.5 percent in early 2021 to 2.8 percent in late 2024, a figure covering all consumer borrowers and, the commentary notes, almost certainly higher within the subprime segment Tricolor served. Financing costs rose over a similar period, with rates on new auto loans reaching a high of 8.4 percent in 2024 from 4.5 percent in early 2022. Used vehicle prices, which set the value of the company’s collateral, fell.
The commentary is careful about what that combination proves. Weakening obligor credit, rising borrowing costs, and declining collateral values are not on their own evidence of failure, still less of misconduct. The point Egan-Jones makes is narrower: taken together, they warranted additional due diligence.
Egan-Jones concludes that shifts in credit quality can often be identified through observable indicators, citing its earlier warnings on Enron and WorldCom and its ranking by Fortune magazine for flagging the 2008 credit crisis. The firm states that it aims to continue providing timely and accurate ratings, and appends its historical ratings performance record.
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SOURCE Egan-Jones Ratings Co.
