Oct 9 - Consumer delinquencies rose slightly across most loan categories in the second quarter, but remain significantly below their 15-year average, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.
The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 6 basis points to 1.76 percent of all accounts in the second quarter. Despite this increase, the ratio is still 25 percent below the 15-year average of 2.36 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
Bank card delinquencies remained virtually unchanged, rising 1 basis point to 2.42 percent of all accounts in the second quarter – 37 percent below their 15-year average of 3.85 percent.
James Chessen, ABA’s chief economist, attributed the slight uptick in delinquencies to a sluggish economy and a limit to how much consumers can improve their financial positions.
“A leveling off in delinquency rates was inevitable after a four-year downward trend that saw consumers reduce debt and dramatically improve their personal balance sheets,” Chessen said. “The good news is that delinquency rates remain near historical lows and are unlikely to spike in the near future.”
Chessen believes that consumers may not be able to reduce leverage much beyond what they’ve already achieved.
“Consumers may find it difficult to further improve their financial positions after years of working to pay down debt,” Chessen said. “Stagnant incomes and a weak job market aren’t going to help change that trend.”
Chessen noted that delinquencies could face an uphill climb as the economy struggles to reach its full potential.
“Until the lackluster economy shifts into a higher gear, it is unlikely that delinquencies will move lower in the near term,” Chessen said. “It’s possible that delinquency rates will remain stuck in neutral for the foreseeable future.”
The second quarter 2013 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts:
In addition, ABA tracks three open-end loan categories: