Consumer Delinquencies Continue Upward Climb In Second Quarter 2009

WASHINGTON – Continued job losses, shorter work weeks and falling incomes are being cited as major factors in another record rate of consumer delinquencies in the second quarter of 2009, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.  Delinquency rates hit record quarterly highs in three key loan categories:  home equity loans, home equity lines of credit, and bank cards.  The composite ratio, which tracks eight closed-end installment loan categories, also hit a record high at 3.35 percent of all accounts (seasonally adjusted) compared to 3.23 percent of all accounts in the previous quarter.  The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

ABA Chief Economist James Chessen said the high consumer credit delinquency rates represent the cumulative effect of the longest recession since the Great Depression.  

“Six consecutive quarters of job losses have taken their toll,” Chessen said.  “With jobs lost and work hours cut, it doesn’t take long for the financial pressure to become overwhelming.  Falling behind on debt payments is an unfortunate side effect of high unemployment and a frozen job market.  The picture won’t change until the labor market improves and the economy picks up steam.  This is going to take time,”   Chessen added.

Bank card delinquencies rose 26 basis points to a record 5.01 percent of all accounts.  Record delinquency rates occurred in home equity loans  – up 49 basis points to 4.01 percent of all accounts – and in home equity lines of credit – up three basis points to 1.92 percent of all accounts.  

Auto loans, however, saw improvement.  Direct auto loan delinquencies fell 55 basis points to 2.46 percent of all accounts and indirect auto loan delinquencies (arranged through auto dealers) dropped to 3.26 percent of all accounts from 3.42 percent in the previous quarter.

“The good news is that consumers are clearly being more cautious by saving more, spending less and making great efforts to repair their balance sheets,” Chessen said.

The second quarter composite ratio is made up of the following closed-end loans.  All figures are seasonally adjusted based upon the number of accounts.

Increased Delinquencies:

• Home equity loan delinquencies rose from 3.52 percent to 4.01 percent.

• Marine loan delinquencies rose from 2.04 percent to 2.28 percent.

• Personal loan delinquencies rose from 3.47 percent to 3.90 percent.

• Property improvement loan delinquencies rose from 1.46 percent to 1.79 percent.

• RV loan delinquencies rose from 1.52 percent to 1.72 percent.

Decreased Delinquencies:

• Direct auto loan delinquencies fell from  3.01 percent to 2.46 percent.
• Indirect auto loan delinquencies fell from 3.42 percent to 3.26 percent.
• Mobile home loan delinquencies fell from 3.70 percent to 3.53 percent.

For homeowners having trouble paying their mortgage, ABA strongly recommends they consult www.hopenow.com or call 1-888-995-HOPE.  HOPE NOW is a cooperative effort between counselors, investors, and lenders to help homeowners in distress.

For others who are 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 http://www.aba.com/abaef/consumers.htm.

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation’s banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.5 trillion in assets and employ over 2 million men and women.