WASHINGTON – Consumer delinquencies continued to move higher in this year’s second quarter, with nine of eleven loan categories showing slightly higher delinquencies amid weak job creation and a slowing economy, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. Bank cards were a bright spot, with delinquencies falling 18 basis points to 3.22 percent of all accounts compared to the previous quarter, a strong showing that is well below the 15-year average (3.94 percent) and below where they stood one year ago at 3.62 percent of all accounts. (See Historical Fact Sheet.)
The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, increased 17 basis points to 2.88 percent of all accounts in the second quarter. That compares to 3.00 percent in the second quarter of 2010. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
ABA Chief Economist James Chessen said the small increase in delinquencies reflects continuing pressures as consumers navigate the consequences of high unemployment, rising gas prices and a struggling economy.
“Lackluster job creation, private sector uncertainty and public sector job cuts have stalled momentum and increased pressure on consumers as the economy struggles to find a way forward,” Chessen said. “A significant increase in gasoline and food prices since the beginning of the year has further stretched family budgets, squeezing consumers and making it difficult for some people to make loan payments.” (See economic charts.)
In addition, delinquency rates on home equity lines of credit rose 11 basis points and home equity loans rose 26 basis points compared to the previous quarter, reflecting continued weakness in the housing market “There will be continued challenges for housing, which has been a persistent drag on economic growth,” Chessen said. “Real estate prices continue to fall, and home loans face increased pressure as unemployment continues to take its toll on borrowers.”
Looking towards the third quarter of 2011, Chessen said he expected delinquencies to stay near current levels.
“It’s hard to envision significant improvements in delinquency rates this year given the sluggish economy and falling consumer sentiment,” Chessen said. “On the positive side, bank card delinquencies have shown encouraging trends as consumers work to reduce their debt obligations and build a better financial base.”
The second 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.
- Personal loan delinquencies rose from 3.05 percent to 3.12 percent.
- Direct auto loan delinquencies rose from 1.20 percent to 1.23 percent.
- Indirect auto loan delinquencies rose from 2.72 percent to 2.89 percent.
- RV loan delinquencies rose from 1.26 percent to 1.42 percent.
- Marine loan delinquencies rose from 1.76 percent to 1.83 percent.
- Property improvement loan delinquencies rose from 1.02 percent to 1.07 percent.
- Home equity loan delinquencies rose from 4.12 percent to 4.38 percent.
- Mobile home loan delinquencies fell from 3.74 percent to 3.62 percent.
In addition, ABA tracks three open-end loan categories:
- Home equity lines of credit delinquencies rose from 1.80 percent to 1.91 percent.
- Non-card revolving loan delinquencies rose from 0.96 percent to 1.11 percent.
- Bank card delinquencies fell from 3.40 percent to 3.22 percent.
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 www.abaef.com
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.