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NEWS RELEASE
July 2, 2008
ABA Media Contact: Carol Kaplan
(202) 663-5471
E-mail: ckaplan@aba.com
WEAK ECONOMY PUSHES CONSUMER DELINQUENCIES HIGHER IN FIRST QUARTER 2008
HELOC and credit card delinquencies rise
WASHINGTON – Continued stress in the housing market combined with general weakness in the overall economy contributed to an increase in the delinquency rates for home equity lines of credit (HELOCs) and bank cards during the first quarter of 2008, according to the American Bankers Association's Consumer Credit Delinquency Bulletin.
The percentage of HELOC accounts that were more than 30 days past due rose 14 basis points to 1.10 percent during the first quarter (seasonally adjusted). This was the highest recorded rate for this category since 1997, although the HELOC delinquency rate remains lower than all other consumer credit categories. In the same period, bank card delinquencies rose 13 basis points to 4.51 percent. This is slightly above the five year average delinquency rate of 4.40 percent for this category.
ABA chief economist James Chessen said that more consumers are having trouble meeting their obligations because of the confluence of anemic personal income growth, falling home equity and stock values, job losses, and rising food and energy prices.
"It was a tough quarter for some people," Chessen said. "Faced with rising food and gas prices and little income growth, fewer resources have been available to manage debt."
Some categories showed delinquencies improving. The composite ratio, which tracks eight closed-end installment loan categories, fell 3 basis points to 2.62 percent. This was largely due to a decline in indirect auto loan delinquencies, which fell 4 basis points to 3.09 percent. The ABA report defines delinquency as late payments that are 30 days or more overdue.
The first 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 fell from 2.39 percent to 2.34 percent.
• Property improvement loan delinquencies fell from 1.81 percent to 1.78 percent.
• Indirect auto loan delinquencies fell from 3.13 percent to 3.09 percent.
• Marine loan delinquencies increased from 1.57 percent to 1.75 percent.
• RV loan delinquencies increased from 1.08 percent to 1.11 percent.
• Mobile home delinquencies increased from 2.92 percent to 3.22 percent.
• Direct auto loan delinquencies increased from 1.90 percent to 1.92 percent.
• Personal loan delinquencies increased from 2.48 percent to 2.55 percent.
Chessen said that individuals will see little relief in the near future and, as a consequence, delinquencies will remain elevated. "The tax stimulus is helping to boost personal income, but persistently high gas and food prices will eat away at overall resources," he said.
Chessen advised consumers to look for warning signs of financial problems and take action quickly. "Any borrowers on the verge of financial stress should seek out their lenders immediately, as more options are likely to be available when problems are addressed early," Chessen urged. "Ignoring the problem always makes it harder to resolve."
Warning signs of overextended credit include:
• 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 $3.3 trillion in assets and employ over 2 million men and women.
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GLOSSARY:
Indirect auto loan: loan arranged through a third party such as an auto dealer.
Direct auto loan: loan arranged directly through a bank.
Delinquency: late payment that is 30 days or more overdue.
Bank card: a credit card provided by a bank.
Closed-end loan: a loan for a fixed amount of money with a fixed repayment period and regularly scheduled payments.
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