Consumer Loan Delinquencies Decline Significantly

The improving economy is a factor in delinquencies declining to below their 15-year average, and the trend is expected to continue.

Consumer delinquencies declined in the third quarter of 2013 as the economy improved and people better managed their finances, according to results from the American Banker’s Association Consumer Credit Delinquency Bulletin released Jan. 9.

The composite ratio, which includes delinquencies in eight closed-end installment loan categories, fell to 1.63 percent of all accounts last year. The ratio is a record low for delinquencies and well under the 15-year average of 2.35 percent.

Delinquencies are late payments that are 30 or more days overdue, according to the ABA report.
“More jobs and higher income are a recipe for lower delinquencies,” said James Chessen, ABA’s chief economist.

Bank card delinquencies increased in the third quarter of 2013, to 2.55 percent of all accounts, but the figure is still less than the 15-year average of 3.84 percent in that category.

Chessen noted that delinquencies in two home-related loan categories, home equity loans and home equity lines of credit, fell sharply in the third quarter as home prices increased.

“This is another sign of a housing sector recovery as people find it easier to sell or refinance their homes,” Chessen said.

He added that small changes in delinquency rates are likely in the months ahead as the economy continues to improve.

“At the same time, consumers can’t afford to be complacent when it comes to keeping debt levels under control,” Chessen said.

The third quarter 2013 composite ratio includes the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.

Closed-End Loans

• Personal loan delinquencies fell from 1.94 percent to 1.51 percent.
• Direct auto loan delinquencies held steady at 0.88 percent.
• Indirect auto loan delinquencies fell from 1.72 percent to 1.64 percent.
• Mobile home delinquencies fell from 3.96 percent to 3.64 percent.
• RV loan delinquencies fell from 1.20 percent to 1.14 percent.
• Marine loan delinquencies fell from 1.55 percent to 1.36 percent.
• Property improvement loan delinquencies rose from 0.80 percent to 1.25 percent.
• Home equity loan delinquencies fell from 3.83 percent to 3.58 percent.

Open-End Loans

• Bank card delinquencies rose from 2.42 percent to 2.55 percent.
• Home equity lines of credit delinquencies fell from 1.90 percent to 1.71 percent.
• Non-card revolving loan delinquencies rose from 1.58 percent to 1.84 percent.

Source: ACA