When Tricolor Holdings blew up last year, lenders learned a hard lesson about trust.
The subprime auto lender collapsed, and suddenly everyone wanted to know the same thing: does the collateral backing my loan actually exist, and is it propping up someone else's loan too?
That panic has turned into a boom for the companies that verify these things for a living.
The trouble started with Daniel Chu, who faced federal charges last year for allegedly conspiring to cheat lenders. Prosecutors say the scheme involved pledging the same collateral for multiple loans at once.
One of the more striking details: a senior deputy to Chu was accused of changing Excel data that Tricolor regularly sent to its financing companies. That made it nearly impossible for lenders to spot the double-pledging until it was too late.
After Tricolor failed, lenders scrambled to track down whatever assets the company still had. That experience left a mark. Weeks after the collapse, at the ABS East gathering at the Fontainebleau hotel on Miami Beach, lenders crowded around Vervent's booth with questions.
Derek Gamble, Vervent's chief operating officer, remembers it clearly. "We literally were the most popular person at this giant conference down in Miami," he said. "They were immediately like, 'That's crazy - should we be concerned? What can we do?'"
Chu appeared in a New York federal courthouse on Jan. 13, 2026, as the case moved forward.
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The numbers tell the story. Guidehouse says demand for its verification services is up 80%. Vervent reports that inquiries about its verification product have risen 50%. Setpoint Technologies and CBIZ say they are also fielding more requests.
It is not just auto lending. Market Financial Solutions Ltd., a mortgage lender, and First Brands Group also ran into troubles that hurt creditors, adding to the workload for verification firms.
The old approach is gone. Lenders used to test a small sample of assets and assume the rest were fine. Now they want complete lists and stricter controls, according to Bart Steenbergen, Setpoint's senior vice president of growth.
"The old attitude is you can't really protect against fraud," Steenbergen said. "If somebody wants to do it, they'll find a way to do it."
That fatalism has faded. Setpoint introduced a product called PledgeCheck late last year that uses automation to examine collateral across lenders, marketed as a safeguard against double-pledging. Guidehouse partner Matt Moosariparambil says lenders are also seeking more cash reconciliations to catch potential fraud early.
Banks are cooperating more than they used to. "Banks are talking to each other more on these transactions than they have in the past," Gamble said. "So when they do diligence, they want to know very clearly who all the other lenders are on this."
Pagaya Technologies Ltd., a network that serves three dozen lenders, has made auto-lending partners use a verification service. President Sanjiv Das says the policy has been in effect for two months, despite pushback from some lenders.
"Your system is as strong as the weakest link," Das said. "We simply cannot run the process with a weak link."
A private-credit client originally suggested that Pagaya work with CBIZ, and the partnership stuck.
The shift matters far beyond the financial district. When lenders verify collateral more carefully, they are less likely to get burned by fraud. That means they can price loans more accurately, which affects the rates you see on car loans, mortgages, and business financing.
"I think lenders are just adjusting what they are expecting from their borrowers to a higher standard," Steenbergen said.
For investors, the takeaway is simple. The collapse of one lender exposed a weakness in the system, and the industry is spending real money to fix it. The companies providing those checks are seeing a surge in business that shows no signs of slowing down.
The next time you sign a loan document, the lender on the other side is probably doing a lot more homework than they used to. That extra scrutiny is a quiet sign that the system just got a little safer.
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