WASHINGTON – Delinquencies in closed-end loans and bank cards rose in last year’s third quarter but remain near historical lows, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Delinquencies rose in five and fell or stayed unchanged in six of the 11 individual loan categories compared to the previous quarter.
The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 6 basis points to 1.41 percent of all accounts. This figure is identical to the third quarter 2015 composite ratio and remains well below the 15-year average of 2.20 percent. (See Historical Graphic
.) The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
“Delinquency rates have held near historical lows for an unusually long period due in large part to consumers’ skillful financial management, but it was inevitable that they would edge up eventually as part of the natural credit cycle,” said James Chessen, ABA’s chief economist. “It’s important for consumers to remain cautious and maintain their discipline in keeping debt at levels they can comfortably manage.”
Bank card delinquencies increased 26 basis points to 2.74 percent of all accounts in the third quarter, but remain well below their 15-year average of 3.68 percent.
“The overwhelming majority of consumers continue to pay their credit card bills on time, with late payments holding near historical lows,” Chessen said. “These types of fluctuations don’t come as a surprise amid a six-year period in which bank card delinquencies have been so far below their long-term average. Banks have worked to ensure that credit lines start off at conservative levels and only increase for borrowers with a good payment history and a proven ability to meet their obligations."
Home-related delinquencies fell in two of three categories. Home equity loan delinquencies fell 11 basis points to 2.59 percent of all accounts, dipping further below their 15-year average of 2.85 percent. Home equity line of credit delinquencies fell 5 basis points to 1.16 percent of all accounts, just one basis point above their 15-year average of 1.15 percent. Property improvement loan delinquencies rose 3 basis points to 0.94 percent of all accounts.
“The three-year trend of declining home equity delinquencies reflects a healthier housing market and rising home values,” said Chessen. “Borrowers are on much firmer financial footing than they were just a few years ago, and greater equity gives them additional motivation to stay current on their obligations.” (See Economic Charts
The third quarter 2016 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
- Home equity loan delinquencies fell from 2.70 percent to 2.59 percent.
- Marine loan delinquencies fell from 1.23 percent to 0.97 percent.
- Mobile home delinquencies fell from 3.17 percent to 3.11 percent.
- Direct auto loan delinquencies rose from 0.82 percent to 0.87 percent.
- Indirect auto loan delinquencies rose from 1.56 percent to 1.62 percent.
- Personal loan delinquencies rose from 1.43 to 1.46 percent.
- Property improvement loan delinquencies rose from 0.91 percent to 0.94 percent.
- RV loan delinquencies remained at 0.96 percent.
In addition, ABA tracks three open-end loan categories:
- Home equity lines of credit delinquencies fell from 1.21 percent to 1.16 percent.
- Non-card revolving loan delinquencies fell from 1.65 percent to 1.61 percent.
- Bank card delinquencies rose from 2.48 percent to 2.74 percent.
For borrowers having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems. Proven tips are listed below. Additional consumer information on budgeting, saving, managing credit and more is available at ABA.com/Consumers
- 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.
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.
Open-end loan: a loan with a fixed amount of available credit but a balance that fluctuates depending on usage such as a line of credit.
Non-card revolving loan: an unsecured, open-end loan that is not linked to a credit card. Examples may include lines of credit for overdraft protection or check credit.
The American Bankers Association is the voice of the nation’s $16 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $12 trillion in deposits and extend more than $9 trillion in loans.