Tricolor’s Sudden Downfall Renews Fear of Subprime Consumer Pain

For years, the most financially strapped Americans have been falling steadily behind on their car payments and other loans too. And yet the US economy has trucked along, seemingly oblivious.

This week, it got a wake-up call.

Tricolor Holdings Inc., which built its business selling used cars and making loans to low-income and undocumented immigrants, filed for bankruptcy Wednesday, potentially saddling major financial institutions with losses and leading authorities to probe allegations of fraud.

While some of its circumstances are specific, they also reflect broader pain for lower-income borrowers — and, increasingly, wealthier Americans — as the economy ...