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Consumer Delinquencies Fall Slightly in First Quarter Print E-mail
Thursday, 09 July 2015

WASHINGTON – Delinquencies in closed-end loans and bank cards fell in the first quarter, highlighted by a significant drop in home equity loan and home equity line delinquencies, according to results from the American Bankers Association’s (ABA) Consumer Credit Delinquency Bulletin.  Delinquencies fell in five of the 11 individual loan categories while delinquencies in two categories – direct auto loans and marine loans – remained unchanged.

The composite ratio, which tracks delinquencies in eight closed-end instalment loan categories, fell one basis point to 1.53 percent of all accounts – continuing a three-year trend of remaining well under the 15-year average of 2.28 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

“It’s highly encouraging that consumers continued to improve their financial situations even during a quarter where the economy contracted,” said James Chessen, ABA’s chief economist.  “This speaks to sustained consumer discipline as Americans continue to use and manage their debt responsibly.”

Delinquencies in all three home-related categories fell in the fourth quarter, with home equity loan delinquencies falling 11 basis points to 3.12 percent, home equity line of credit delinquencies falling 6 basis points to 1.42 percent and property improvement loan delinquencies falling three basis points to 0.90 percent. 

“Home equity loan and line delinquencies are tracking the slow and steady improvements in the housing market,” said Chessen. “As property values improve, fewer people have negative equity in their homes.  Greater household wealth and income gives consumers more breathing room to meet their financial obligations.”

Bank card delinquencies fell slightly in the first quarter, dropping three basis points to 2.49 percent of all accounts. They remain well below their 15-year average of 3.76 percent and have varied by only 14 basis points since the fourth quarter of 2012.

“Delinquencies for credit cards have remained remarkably stable at historically low rates,” said Chessen. 

Chessen expects the delinquency levels to hold near record lows amid a stable economy and continued financial vigilance among consumers.

“Falling unemployment, steady job gains and higher incomes may have driven delinquencies rates down to about as low as they can go,” said Chessen.  “Maintaining these low delinquency levels is possible as long as consumers remain focused on managing their level of debt.  People have done a great job over the last few years and hopefully the lessons of the past will continue to pay dividends well into the future.”
 
The first quarter 2015 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

    •    Personal loan delinquencies rose from 1.42 percent to 1.48 percent.
    •    Direct auto loan delinquencies remained at 0.71 percent.
    •    Indirect auto loan delinquencies rose from 1.53 percent to 1.58 percent.
    •    Mobile home delinquencies fell from 3.60 percent to 3.52 percent.
    •    RV loan delinquencies rose from at 0.98 percent to 1.01 percent.
    •    Marine loan delinquencies remained at 1.17 percent.
    •    Property improvement loan delinquencies fell from 0.93 percent to 0.90 percent.
    •    Home equity loan delinquencies fell from 3.23 percent to 3.12 percent.

In addition, ABA tracks three open-end loan categories:
 
OPEN-END LOANS

    •    Bank card delinquencies fell from 2.52 percent to 2.49 percent.
    •    Home equity lines of credit delinquencies fell from 1.48 percent to 1.42 percent.
    •    Non-card revolving loan delinquencies rose from 1.80 percent to 1.91 percent.

Consumer Tips

For borrowers having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems.  Proven tips are listed below.  Additional consumer information on budgeting, saving, managing credit and more is available at ABA.com/Consumers.
 
    •    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.

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.

(Source - ABA News Release)

  

 

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