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NEWS RELEASE
April 3, 2008
ABA Media Contact: Carol Kaplan
(202) 663-5471
E-mail: ckaplan@aba.com
CONSUMER DELINQUENCIES UP IN FOURTH QUARTER 2007
Composite ratio climbs to highest level since 1992
WASHINGTON – Consumer credit delinquencies in the fourth quarter of 2007 reached their highest levels since 1992, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. The composite ratio, which tracks eight closed-end installment loan categories, rose 21 basis points to 2.65 percent of all accounts in the fourth quarter (seasonally adjusted).
All eight loan categories experienced increased delinquencies during the fourth quarter, a rare occurrence. The ABA report defines delinquency as late payments that are 30 days or more overdue. (See Historical Fact Sheet)
James Chessen, ABA chief economist, attributed the rise largely to auto loan delinquencies. The auto loan category comprises about two-thirds of all closed-end consumer installment loans. In addition, the number of delinquent bank card accounts rose 20 basis points to 4.38 percent, but remains close to the five-year average of 4.40 percent.
“The rise in consumer credit delinquencies is consistent with a rapidly slowing economy,” Chessen said. “Stress in the housing market still dominates the story but it’s a broader tale of an overall weak economy.”
The weak housing market continues to be reflected in rising delinquency rates for home equity loans and lines of credit. Delinquencies for home equity lines of credit – the lowest delinquency rate category – rose 12 basis points to 0.96 percent.
The fourth 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 2.39 percent from 2.28 percent.
- Property improvement loan delinquencies increased to 1.81 percent from 1.60 percent.
- Indirect auto loan delinquencies increased to 3.13 percent from 2.86 percent.
- Direct auto loan delinquencies increased to 1.90 percent from 1.81 percent.
- Personal loan delinquencies increased to 2.48 percent from 2.29 percent.
- Mobile home loan delinquencies increased to 2.92 percent from 2.87 percent.
- Marine loan delinquencies increased to 1.57 percent from 1.30 percent.
- Recreational vehicle loan delinquencies increased to 1.08 percent from 0.89 percent.
Chessen predicted that delinquencies will continue to rise during the first half of 2008.
“No relief for consumers is in sight as food and gas prices remain stubbornly high and income growth is anemic,” Chessen said.
Chessen recommends that borrowers experiencing financial stress should seek out their lenders promptly as more options are likely to be available when the problem is addressed early.
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 taking action – sooner rather than later – by following these 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 1-800-388-2777.
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 charts.
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