For Immediate Release
July 6, 2017
​ABA Media Contact: Mike Townsend
(202) 663-5471
Email: mtownsend@aba.com
Follow us on Twitter: @ABABankers

ABA Report: Consumer Delinquencies Rise in First Quarter

WASHINGTON – Delinquencies in closed-end loans rose in the first quarter, driven by an uptick in late payments on auto loans, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Overall, delinquencies rose in 7 of the 11 individual consumer loan categories tracked by ABA.  
 
Installment Loans Historical Graphic - Q1 2017 Delinquency Bulletin.jpgThe composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 5 basis points to 1.56 percent of all accounts – but remains well below the 15-year average of 2.17 percent. (See Historical Graphic.)  The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
 
“Eight years into the economic recovery, it was inevitable that we’d start to see delinquencies edge up from their extremely low levels,” said James Chessen, ABA’s chief economist. “Even in a strong economy with good job growth, there are always people living paycheck to paycheck. Any small bump in the road can be enough to cause them to miss a payment or two on their loan. The good news is that most consumers have been careful to manage their debt levels to ensure they can withstand those small setbacks and meet their obligations.” 
 
Delinquencies in indirect auto loans (those arranged through a third party such as an auto dealer) rose 8 basis points to 1.83 percent of all accounts, but remain well below their 15-year average of 2.20 percent. Delinquencies in direct auto loans (those arranged directly through a bank) rose 9 basis points to 1.03 percent of all accounts, remaining well under their 15-year average of 1.57 percent.
 
“The gloss is fading a bit on auto lending as delinquencies rise,” Chessen said.  “The thrill of a new car shouldn’t override the need for consumers to balance affordability and loan duration to ensure they’re not taking on too much for too long.”
 
Delinquencies in bank cards (credit cards provided by banks) rose 5 basis points to 2.74 percent of all accounts, after falling by 5 basis points in the fourth quarter of 2016.  Bank card delinquencies remain significantly below their 15-year average of 3.65 percent.
 
Delinquencies in home-related categories fluctuated modestly. Home equity loan delinquencies fell 2 basis points to 2.59 percent of all accounts, holding under their 15-year average of 2.95 percent. Home equity line of credit delinquencies rose 5 basis points to 1.11 percent of all accounts, but remain below their 15-year average of 1.18 percent. Property improvement loan delinquencies held steady at 0.98 percent of all accounts.
 
“As home prices have risen, home-related delinquencies have returned to normal levels,” said Chessen. “Greater equity incentivizes people to remain current on their mortgage loans, and we expect this gradual improvement to continue.” 
 
Chessen foresees modest economic growth this year and next, and encourages consumers to remain financially vigilant amid uncertainty that lies ahead.
 
“The key to keeping delinquencies low is a strong economy that supports households’ financial obligations through job growth and higher wages,” Chessen said. “It’s inevitable that delinquencies will rise to more normal levels, particularly if economic growth stays persistently below 2 percent. As the economic cycle eventually comes full circle, it’s important for consumers to maintain a smart and disciplined approach to credit, especially millennials who may be navigating a downturn for the first time in their professional lives.” (See Economic Charts.)    
The first quarter composite ratio is made up of the following eight closed-end loans.  All figures are seasonally adjusted based upon the number of accounts.
 
CLOSED-END LOANS
  • Composite Ratio rose from 1.51 percent to 1.56 percent.
  • Home equity loan delinquencies fell from 2.61 percent to 2.59 percent.
  • Personal loan delinquencies fell from 1.56 to 1.54 percent.
  • RV loan delinquencies fell from 1.03 percent to 1.02 percent.
  • Property improvement loan delinquencies remained at 0.98 percent.
  • Direct auto loan delinquencies rose from 0.94 percent to 1.03 percent.
  • Indirect auto loan delinquencies rose from 1.75 percent to 1.83 percent.
  • Marine loan delinquencies rose from 0.99 percent to 1.02 percent.
  • Mobile home delinquencies rose from 4.07 percent to 4.86 percent.
 
In addition, ABA tracks three open-end loan categories:
 
OPEN-END LOANS
 
  • Home equity lines of credit delinquencies rose from 1.06 percent to 1.11 percent.
  • Bank card delinquencies rose from 2.69 percent to 2.74percent.
  • Non-card revolving loan delinquencies rose from 1.57 percent to 1.64 percent.
 
Consumer Tips
 
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.
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.
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 $17 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13 trillion in deposits and extend more than $9 trillion in loans.
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