Consumer Loan Delinquencies Decline in Third Quarter 2009

WASHINGTON –  Consumer loan delinquencies fell in seven loan categories, marking the first time since 2007 that so many loan categories experienced declines, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.  The composite ratio, which tracks eight closed-end installment loan categories, fell 12 basis points to 3.23 percent of all accounts compared to 3.35 percent of all accounts in the previous quarter.  Bank card delinquencies fell 24 basis points to 4.77 percent of all accounts.  The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

ABA Chief Economist James Chessen said the news was positive, but the weak economy and job losses continue to weigh on consumers.

“Delinquencies may be near their peak as job losses have slowed.   Consumers are working hard to get their financial houses in order by spending less, saving more, and paying down debt.  But there’s still a bumpy road ahead with many people unemployed and family budgets stretched to their limits,” Chessen said. (See Economic Charts.)

Chessen also attributed the lower delinquency rates to banks writing off bad loans.

“Banks are putting losses behind them, setting the stage for expanded lending to consumers as the economy recovers,” he said.

Auto loans showed continued improvement.  Direct auto loan delinquencies fell nearly half a point to 2.04 percent of all accounts and indirect auto loan delinquencies (arranged through auto dealers) dropped to 3.15 percent of all accounts compared to 3.26 percent of all accounts in the previous quarter.  

“It’s always a good sign when delinquencies decline, but  they’re still relatively high,” Chessen said.  “Until the economy generates more jobs and the housing sector stabilizes, they’re likely to stay that way.”

Housing-related loans continued to show stress.  Home equity loan delinquencies hit another record, jumping 29 basis points to 4.30 percent of all accounts.  Home equity lines of credit delinquencies also hit a new record, rising 20 basis points to 2.12 percent of all accounts.   Mobile home delinquencies increased to 3.63 percent of all accounts from 3.53 percent of all accounts in the previous quarter.                        

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

Increased Delinquencies:

• Home equity loan delinquencies rose from 4.01 percent to 4.30 percent.
• Mobile home loan delinquencies rose from 3.53 percent to 3.63 percent.

Decreased Delinquencies:

• Direct auto loan delinquencies fell from 2.46 percent to 2.04 percent.
• Indirect auto loan delinquencies fell from 3.26 percent to 3.15 percent.
• Marine loan delinquencies fell 2.28 percent to 2.21 percent.
• Personal loan delinquencies fell from 3.90 percent to 3.74 percent.
• Property improvement loan delinquencies fell from 1.79 percent to 1.66 percent.
• RV loan delinquencies fell from 1.72 percent to 1.64 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 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.