WASHINGTON – Consumer delinquencies fell in seven of eleven loan categories in the third quarter of 2011, with two categories – bank cards and home equity lines of credit – holding virtually steady. The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 29 basis points to 2.59 percent of all accounts in the third quarter. That compares to 3.01 percent in the third quarter of 2010, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.
Bank card delinquencies rose just three basis points to 3.25 percent compared to the previous quarter and remain well below the 15-year average (3.94 percent). Only non-card revolving loans and mobile home loan delinquencies showed increases. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
ABA Chief Economist James Chessen said the results show that consumers continue to make progress rebuilding their financial base.
“Household debt levels continue to fall and are getting easier to manage. Subtle improvements in the economy such as lower gas prices and a better job market have reduced some of the stresses facing consumers,” Chessen said.
In addition, delinquency rates on housing-related loans showed signs of stabilization in a still-struggling sector. “The housing market is still ill, but signs of a turning point are beginning to appear,” Chessen said. Home equity loan delinquencies fell 26 basis points to 4.12 percent of all accounts in the third quarter, property improvement loans fell 11 basis points to 0.96 percent of all accounts, and home equity lines of credit essentially held steady, rising just two basis points to 1.93 percent of all accounts.
Looking forward, Chessen said he expected slow improvement in the composite index but bank card delinquencies to stay near current levels.
“Improvement in delinquencies over the next year hinges on the housing market, which still poses an enormous challenge to continued economic growth. Job creation and income growth are also a must if we hope to see delinquencies continue to fall,” he said.
The third quarter 2011 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
CLOSED-END LOANS
Increased Delinquencies:
• Mobile home loan delinquencies rose from 3.62 percent to 4.08 percent.
Decreased Delinquencies:
• Personal loan delinquencies fell from 3.12 percent to 3.00 percent.
• Direct auto loan delinquencies fell from 1.23 percent to 1.15 percent.
• Indirect auto loan delinquencies fell from 2.89 percent to 2.60 percent.
• RV loan delinquencies fell from 1.42 percent 1.38 percent.
• Marine loan delinquencies fell from 1.83 percent to 1.72 percent.
• Property improvement loan delinquencies fell from 1.07 percent to 0.96 percent.
• Home equity loan delinquencies fell from 4.38 percent to 4.12 percent.
In addition, ABA tracks three open-end loan categories:
OPEN-END LOANS
Increased Delinquencies:
• Home equity lines of credit delinquencies rose from 1.91 percent to 1.93 percent.
• Non-card revolving loan delinquencies rose from 1.11 percent to 1.43 percent.
• Bank card delinquencies rose from 3.22 percent to 3.25 percent.
Consumer Tips
For borrowers having trouble paying down debts, ABA advises taking action — sooner rather than later — to solve debt problems with the following tips:
• Talk with creditors – the sooner you talk to them, the more options you have;
• Don’t charge more purchases until your problems are solved;
• Avoid bankruptcy – it’s a short-term solution with long-term consequences; and
• Contact Consumer Credit Counseling Services at 1-800-388-2227.
For more information on budgeting, saving and managing credit, visit the ABA Education Foundation’s consumer web page at /abaef/consumers.htm.
Glossary
Indirect auto loan: loan arranged through a third party such as an auto dealer.
Direct auto loan: loan arranged directly through a bank.
Delinquency: late payment that is 30 days or more overdue.
Bank card: a credit card provided by a bank.
Closed-end loan: a loan for a fixed amount of money with a fixed repayment period and regularly scheduled payments.
Open-end loan: a loan with a fixed amount of available credit but a balance that fluctuates depending on usage such as a line of credit.
The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees. Learn more at aba.com.
