LATE CREDIT CARD PAYMENTS FELL SLIGHTLY

IN SECOND QUARTER 2007

Credit card delinquencies are relatively unchanged despite subprime turmoil

WASHINGTON, Sept. 26 – Credit card loan delinquencies remained stable – and even fell slightly – in the second quarter of 2007, according to the American Bankers Association's Consumer Credit Delinquency Bulletin.  Late payments on credit cards were 4.39 percent of all accounts in the second quarter, compared to 4.41 percent in the first quarter of this year (seasonally adjusted).  The ABA report defines late payments as 30 days or more overdue. (see charts)

"Consumers fared reasonably well in the second quarter despite turmoil in the subprime mortgage market" said James Chessen, ABA chief economist.  "Relatively good numbers in income and job growth have helped to limit spillover to other consumer loans." 

The fact that credit card repayment rates led mortgage repayment rates may seem to go against conventional wisdom, according to Chessen.  But consumers' priorities can shift, especially for borrowers who face a one-two punch:  higher interest payments on their adjustable rate mortgages and declining equity as their home prices fall.   

 "Not surprisingly, customers may feel helpless when faced with a mortgage reset they can't afford, but they still want to keep up with other payments," said Chessen. "People need to pay for gas and their cars so that they can get to work." 

The news for home equity loans was mixed.  Delinquencies for home equity lines of credit – the lowest delinquency rate category – increased to 0.77 percent from 0.60 percent.  But closed-end home equity loan delinquencies decreased to 1.99 percent from 2.15 percent.

The number of delinquent accounts in the composite ratio, which tracks eight closed-end installment loan categories, decreased to 2.27 percent from 2.42 percent.

The second quarter composite ratio is made up of the following closed-end loans:

• Home equity loan delinquencies decreased to 1.99 percent from 2.15 percent;
• Property improvement loan delinquencies decreased to 1.46 percent from 1.61 percent;
• Indirect auto loan delinquencies increased to 2.77 percent from 2.73 percent;
• Direct auto loan delinquencies increased to 1.69 percent from 1.68 percent;
• Personal loan delinquencies decreased to 2.05 percent from 2.08 percent;
• Mobile home loan delinquencies decreased to 2.61 percent from 2.94 percent;
• Marine loan delinquencies decreased to 1.23 percent from 1.41 percent; and
• Recreational vehicle loan delinquencies decreased to 0.94 percent from 1.03 percent.

"Any borrower with an adjustable rate mortgage should review the timing of any interest rate reset and what the new payment will be.  If there's any concern about meeting that obligation, contact your lender immediately to discuss options," Chessen said. "Lenders are willing to work with borrowers during periods of financial stress, but ignoring the problem only makes the situation worse."

ABA advises consumers to review their finances often and watch for the warning signs of being overextended on 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 those who are having trouble paying down their debts, ABA advises consumers to take action 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, on behalf of the more than 2 million men and women who work in the nation's banks, brings together all categories of banking institutions to best represent the interests of this rapidly changing industry. Its membership — which includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks — makes ABA the largest banking trade association in the country.

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