|
NEWS RELEASE
July 7, 2009
ABA Media Contact: Carol Kaplan
(202) 663-5471
E-mail: ckaplan@aba.com
CONSUMER DELINQUENCIES RISE AGAIN IN FIRST QUARTER 2009
Composite ratio inches higher, sets new record
WASHINGTON – A record wave of job losses is being cited as a major factor in a record rate of consumer delinquencies in the first quarter of 2009, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. More than two million Americans lost their jobs in the first three months of the year with more than 6 million jobs lost since the recession began. The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose to 3.23 percent of all accounts (seasonally adjusted) compared to 3.22 percent of all accounts in the previous quarter. The delinquent balances on those accounts also rose from 3.16 percent to 3.35 percent of total balances due (not seasonally adjusted). The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
ABA Chief Economist James Chessen said the figures are a natural consequence of mounting job losses in a weakening economy.
“The number one driver of delinquencies is job loss,” Chessen said. “When people lose their jobs, they can’t pay their bills. Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround,” Chessen said, adding that job growth is not likely to improve in the foreseeable future. “However, many people are taking greater control of their finances by cutting spending, lowering debt and saving more money.”
Chessen said the unemployed may be using bank cards to bridge a temporary income gap, especially with less home equity to fall back on as housing prices continue to fall. Bank card delinquencies rose 23 basis points to 4.75 percent (s.a.) of all accounts, compared to 4.52 percent in the previous quarter. (The record was 4.81 percent in the second quarter of 2005.) However, the balances on those delinquent accounts rose dramatically, up 108 basis points to 6.60 percent (n.s.a.) of the value of all outstanding bank card debt, marking a new record.
Reflecting continued weakness in the housing sector, delinquencies for the home equity category also hit record highs: home equity loan delinquencies rose 49 basis points to 3.52 percent of accounts, and home equity lines of credit delinquencies rose 43 basis points to 1.89 percent of accounts.
“Even if home prices stop falling later this year, unemployment will keep home equity delinquencies high for some time,” Chessen said.
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 increased from 3.03 percent to 3.52 percent.
- Property improvement loan delinquencies decreased from 1.75 percent to 1.46 percent.
- Indirect auto loan delinquencies decreased from 3.53 percent to 3.42 percent.
- Direct auto loan delinquencies increased from 2.03 percent to 3.01 percent.
- Marine loan delinquencies decreased from 2.35 percent to 2.04 percent.
- RV loan delinquencies increased from 1.38 percent to 1.52 percent.
- Mobile home loan delinquencies increased from 2.96 percent to 3.70 percent.
- Personal loan delinquencies increased from 2.88 percent to 3.47 percent.
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.
For others who are having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems with the following tips:
- Talk with creditors – the sooner you talk to them, the more options you have;
- 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/abaef/consumers.htm.
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 $13.5 trillion in assets and employ over 2 million men and women.
# # #
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.
| 
