Bank card delinquencies declined in the second quarter while the composite ratio of installment loan delinquencies rose modestly, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Importantly, 8 of the 11 categories tracked by ABA showed improvement or held steady, while two others edged up only 1 basis point.The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 3 basis points to 1.76 percent of all accounts, driven primarily by a 12-basis point rise in home equity loan delinquencies. Nonetheless, all other closed-end loans held steady or declined, and the overall composite ratio remains well below the 15-year average of 2.13 percent. (See Historical Graphic.) The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
“As the economy keeps humming along, delinquencies have stayed at very low levels,” said James Chessen, ABA’s chief economist. “Overall, consumer financial health has been excellent. Jobs are plentiful, wages are rising and savings rates have held steady at elevated levels, which paints a vivid picture conducive to low delinquencies. While delinquencies have held steady, the holiday season is fast approaching and a watchful eye on budgets is the key to successfully managing debt obligations.”
Delinquencies in bank cards (credit cards provided by banks) decreased 13 basis points to 2.93 percent of all accounts, remaining well below their 15-year average of 3.55 percent.
“Consumers are spending in line with their income and managing their credit cards very well,” Chessen said. “This vigilance has kept credit card debt low relative to income for six years, and positions consumers to continue supporting our growing economy.” (See Economic Charts
Delinquencies rose in two home-related categories and fell in another. Home equity loan delinquencies rose 12 basis points to 2.43 percent of all accounts, but remain well below their 15-year average of 3.00 percent. Home equity line of credit delinquencies rose 1 basis point to 1.15 percent of all accounts, staying below their 15-year average of 1.21 percent. Property improvement loan delinquencies fell 9 basis points to 1.07 percent of all accounts, dipping further below their 15-year average of 1.28 percent.
“Despite the upward blip in home equity delinquencies this quarter, the trend continues in the right direction,” Chessen said. “Home-related delinquencies are back down to pre-recession levels.”
Delinquencies in direct auto loans (those arranged directly through a bank) fell 4 basis points to 1.06 percent of all accounts, remaining well under their 15-year average of 1.48 percent. Delinquencies in indirect auto loans (those arranged through a third party such as an auto dealer) remained 1.93 percent of all accounts, holding well below their 15-year average of 2.19 percent.
Chessen expects the robust employment outlook to help keep delinquency levels low as consumers maintain their budgetary vigilance.
“We expect the strong job market to continue over the next year, which should improve household finances and help keep delinquencies in check,” Chessen said. “As always, judicious spending is the key to preventing delinquencies.”
The second quarter composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
- Composite Ratio rose from 1.73 percent to 1.76 percent.
- Direct auto loan delinquencies fell from 1.10 percent to 1.06 percent.
- Marine loan delinquencies fell from 0.80 percent to 0.74 percent.
- Mobile home delinquencies fell from 5.09 percent to 5.07 percent.
- Personal loan delinquencies fell from 1.65 to 1.47 percent.
- Property improvement loan delinquencies fell from 1.16 percent to 1.07 percent.
- Indirect auto loan delinquencies remained at 1.93 percent.
- RV loan delinquencies remained at 0.78 percent.
- Home equity loan delinquencies rose from 2.31 percent to 2.43 percent.
In addition, ABA tracks three open-end loan categories:
- Bank card delinquencies fell from 3.06 percent to 2.93 percent.
- Home equity lines of credit delinquencies rose from 1.14 percent to 1.15 percent.
- Non-card revolving loan delinquencies rose from 1.56 percent to 1.57 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 $18.5 trillion banking industry, which is composed of small, regional and large banks. Together, America’s banks employ more than 2 million men and women, safeguard $14 trillion in deposits and extend more than $10 trillion in loans.
Through its leadership, partnerships, and national programs, ABA’s Community Engagement Foundation (dba ABA Foundation), a 501(c)3, helps bankers provide financial education to individuals at every age, elevate issues around affordable housing and community development, and achieve corporate social responsibility objectives to improve the well-being of their customers and their communities.