Fifth Third Says $200 Million Loan Fraud Isolated Incident

Fifth Third Bank says a fraud incident on a $200 million loan was a one-time occurrence.

The bank says it was the victim of fraud on a loan carrying a $200 million balance, and thinks this was a “one-off” incident that will lead to “a fair amount of litigation,” CEO Tim Spence said Wednesday (Sept. 10) at a Barclays financial services conference, per Bloomberg News.

In a securities filing Tuesday (Sept. 9), the bank said it had uncovered “alleged external fraudulent activity” at a commercial borrower associated with that borrower’s asset-backed finance loan.

“Based on currently available information, the Bancorp currently estimates that the non-cash impairment charge associated with this asset-backed finance loan, which would be recognized in the third quarter of 2025, will be in the range of $170 million to $200 million,” the filing said.

The bank goes on to say it is “working with the appropriate law enforcement authorities in connection with this matter.”

An earlier report by Bloomberg citing people with knowledge of the matter said banks including Fifth Third, JPMorgan Chase and Barclays were preparing to suffer hundreds of millions of dollars in combined losses from loans tied to subprime auto lender Tricolor Holdings.

Neither Spence at the conference nor Fifth Third in its filing mentioned the borrower by name. Spence said the bank has looked at every client in its warehouse business since discovering the incident and has found no other problems. He said the bank will hold a full review into how the operation manages collateral.

This news follows reports from earlier this week among auto industry media outlets that Tricolor was preparing to file for bankruptcy. Last week, the company had put the majority of its staff on temporary leave and suspended operations in Arizona, California and Texas.

The Tricolor Holdings website appeared to be shut down as of Wednesday morning.

Tricolor Auto is the seventh-largest independent used-car retailer in the county, focused on selling vehicles to people with poor credit or without permanent residency documents.

Earlier this year, PYMNTS spoke with Mauricio Delgado, the company’s chief strategy officer, about how Tricolor uses artificial intelligence (AI) to use targeted online advertising.

“This results in 80% of the leads being generated through targeted digital campaigns,” he said. “It also dramatically lowers customer acquisition costs, with Tricolor paying hundreds of dollars per customer versus the thousands per customer spent by much bigger brands in the space.”