LATE CREDIT CARD PAYMENTS CONTINUED TO FALL IN THIRD QUARTER 2007

Home equity and property improvement loan delinquencies rise
           

WASHINGTON, Jan. 3 – Credit card delinquencies continued to fall during the third quarter of 2007, according to the American Bankers Association's Consumer Credit Delinquency Bulletin.  Late payments on credit cards fell 21 basis points to 4.18 percent of accounts in the third quarter (seasonally adjusted).  The ABA report defines late payments as 30 days or more overdue.  (Click here for Historical Fact Sheet)

"Credit card holders continued to improve on-time payments during the third quarter despite obvious stress in the housing market," said James Chessen, ABA chief economist.  "Modest income and job growth helped ease consumers' financial stress even as they worried how to pay for the rising costs of gas, food, and energy."

The fact that credit card repayment rates continue to improve as mortgage repayments worsen may seem contrary to conventional wisdom, Chessen said.

"Consumers facing mortgage resets may be under financial pressure, but they still want to keep up with other payments," Chessen said.  "They still need to heat their homes, put food on the table and fill their cars with gas."

"Consumer loans directly related to the housing market were hit the hardest," Chessen said.  "We anticipate delinquency rates will continue to rise on these types of loans in the fourth quarter of 2007 reflecting continued weakness in the housing sector."

Delinquencies for home equity lines of credit – the lowest delinquency rate category – rose seven basis points to 0.84 percent.  Delinquencies for closed-end home equity loans rose 29 basis points to 2.28 percent and property improvement loan delinquencies went up 14 basis points to 1.60 percent.

The number of delinquent accounts in the composite ratio, which tracks eight closed-end installment loan categories, increased 17 basis points to 2.44 percent. 

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

• Home equity loan delinquencies increased to 2.28 percent from 1.99 percent;
• Property improvement loan delinquencies increased to 1.60 percent from 1.46 percent;
• Indirect auto loan delinquencies increased to 2.86 percent from 2.77 percent;
• Direct auto loan delinquencies increased to 1.81 percent from 1.69 percent;
• Personal loan delinquencies increased to 2.29 percent from 2.05 percent;
• Mobile home loan delinquencies increased to 2.87 percent from 2.61 percent;
• Marine loan delinquencies increased to 1.30 percent from 1.23 percent;
• Recreational vehicle loan delinquencies decreased to 0.89 percent from 0.94 percent.

"Any borrower experiencing financial stress should seek out their lender promptly as it's important to address the problem early when more options for help are likely to be available," Chessen recommended.  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.

ABA advises consumers to review their finances often and watch for the warning signs of overextended credit:

• Paying only the minimum payment month after month;
• Being out of cash constantly;
• Being late on important payments such as rent or mortgage;
• Taking longer and longer to pay off balances; and
• Borrowing from one lender to pay another.

For others having trouble paying down debts, ABA advises consumers to take action - sooner rather than later - to solve debt problems with the following tips:

• Talk with creditors – hiding only makes the problem worse;
• 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 Connection web page at www.aba.com.

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 $12.7 trillion in assets and employ over 2 million men and women.

Click here for Historical Fact Sheet.

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