Consumer Credit Delinquencies Rise Slightly In First Quarter 2011

Improving trends in consumer credit delinquencies hit a soft patch as the economy slowed in the first quarter of 2011 with five of eleven loan categories showing slightly higher delinquencies, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. Bank card delinquencies rose 12 basis points to 3.40 percent of all accounts compared to the previous quarter, but remain well below the 15-year average (3.95 percent) and below where they stood one year ago at 3.88 percent of all accounts.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose three basis points to 2.71 percent of all accounts in the first quarter. That compares to 2.98 percent in the first 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 slight increase in delinquencies shows that some consumers are still struggling to keep up with their bills and feel uneasy about economic conditions.

“Rising gas and food prices took a big bite out of family budgets in the first quarter of 2011,” Chessen said. “With family incomes already stretched, even small increases in daily living expenses can be enough to derail the ability to meet debt obligations. Consumers are feeling insecure about the economy and whether their financial resources can carry them through until conditions improve. With a slow-growing economy and weak job growth, there will continue to be financial stress that will make it hard for some people to pay their bills on time.” (See economic charts.)

In addition, delinquency rates on both home equity lines of credit and home equity loans rose seven basis points compared to the previous quarter, reflecting the continued weakness in the residential real estate market. “This is no surprise, and home equity loans will continue to have elevated levels of delinquencies for the foreseeable future,” Chessen said.

Looking towards the second quarter of 2011, Chessen said he expected delinquencies to stay near current levels.

“It’s hard to see dramatic improvements in delinquency rates when the economy still is barely moving forward. Until the economy shifts up a gear, employment improves, and food and gas prices stabilize, some people will struggle to make ends meet,” Chessen said.

The first 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.

Decreased Delinquencies:

• Personal loan delinquencies fell from 3.08 percent to 3.05 percent.
• Direct auto loan delinquencies fell from 1.44 percent to 1.20 percent.
• Mobile home loan delinquencies fell from 3.92 percent to 3.74 percent.
• RV loan delinquencies fell from 1.40 percent o 1.26 percent.
• Marine loan delinquencies fell from 1.89 percent to 1.76 percent.
• Property improvement loan delinquencies fell from 1.26 percent to 1.02 percent.

Increased Delinquencies:

• Indirect auto loan delinquencies rose from 2.66 percent to 2.72 percent.
• Home equity loan delinquencies rose from 4.05 percent to 4.12 percent.

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

Increased Delinquencies:

• Bank card delinquencies rose from 3.28 percent to 3.40 percent.
• Home equity lines of credit delinquencies rose from 1.73 percent to 1.80 percent.
• Non-card revolving loan delinquencies rose from 0.87 percent to 0.96 percent.

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.