Consumer Loan Delinquencies Up Slightly in Second Quarter 2008: ABA

Despite continued economic stress, consumer loan delinquencies rose only slightly during the second quarter of 2008, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.   Several consumer loan categories saw delinquencies fall. 

ABA Chief Economist James Chessen noted that the federal economic stimulus payments helped to keep delinquencies in check.

“Having that financial shot in the arm appears to have helped some Americans pay off debt during the second quarter of 2008,” Chessen said.  “Borrowers are also being more cautious in adding to their overall debt, which is prudent in the face of a slowing economy.”

The composite ratio, which tracks eight closed-end installment loan categories, rose just six basis points to 2.68 percent.  The slight increase in the composite ratio was largely due to home equity loan delinquencies, a sign of continued weakness in the housing market.  Home equity loan delinquencies jumped 22 basis points to 2.56 percent.  Personal loans also saw increased delinquencies.  Moreover, a very slight increase in delinquencies was observed in credit cards, which rose three basis points to 4.54 percent.  The ABA report defines a delinquency as a late payment that is 30 days or more overdue.  (See Historical Fact Sheet.)

The second quarter composite ratio is made up of the following closed-end loans.  All figures are seasonally adjusted based upon the number of accounts.

• Home equity loan delinquencies increased from 2.34 percent to 2.56 percent.
• Property improvement loan delinquencies fell from 1.78 percent to 1.49 percent. 
• Indirect auto loan delinquencies fell from 3.09 percent to 3.07 percent. 
• Direct auto loan delinquencies fell from 1.92 percent to 1.77 percent. 
• Marine loan delinquencies fell from 1.75 percent to 1.54 percent. 
• RV loan delinquencies fell from 1.11 percent to 1.07 percent. 
• Mobile home loan delinquencies fell from 3.22 percent to 3.03 percent. 
• Personal loan delinquencies increased from 2.55 percent to 2.67 percent.

Chessen said consumers still face formidable headwinds as the economic recovery is still months away.   “The collision of falling home values, declining stock prices and rising everyday expenses has severely dented the financial security of many people.  Until these factors improve, the overall resources of American families will be stretched,” he said. 

Chessen advised consumers to look for warning signs of financial problems and take action quickly.  Warning signs of overextended credit include:

• 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 homeowners having trouble paying their mortgage, ABA strongly recommends they consult www.hopenow.com or call 1-888-995-HOPE.  HOPE NOW is a cooperative effort between counselors, investors, and lenders to help homeowners in distress.

For others having trouble paying down debts, ABA advises taking action — sooner rather than later — 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 brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation’s banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.3 trillion in assets and employ over 2 million men and women.