Average Account Balance in Collection Increases to All-Time High
The Federal Reserve Bank of New York (FRBNY) Thursday released data that showed the average account balance of people that are currently in the third party debt collection process increased to $1,550 in the second quarter of 2012, the highest reading ever reported.
In its Quarterly Report on Household Debt and Credit, the FRBNY said that 14.25 percent of Americans currently have at least one account being handled by third party debt collectors, a percentage that has been essentially flat over the past four quarters. The average balance of those accounts is $1,550, up from $1,497 in the first quarter of 2012 and the first time the average has been above $1,500.
The average balance of accounts in collection spiked in 2010 and fell sharply at the beginning of 2011. It has been steadily increasing since then, and in the first quarter of this year overtook its previous high-water mark.
The quarterly report also showed that most types of loans and credit products are experiencing declines in 90+ day delinquencies, a leading indicator for the ARM industry. Credit card severe delinquencies fell 3.3 percent in Q2 2012 compared to the previous quarter, auto loan delinquencies dropped 6.8 percent, and mortgage arrears fell 5.1 percent. But student loan 90+ day delinquencies increased 2.6 percent quarter-over-quarter.
The FRBNY report noted that since the peak in household debt in the third quarter of 2008, student loan debt has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion.
The FRBNY does an excellent job with these quarterly reports and I have used them in the past and will in the future. Some cautions to consider:
-balance swings may be influenced by different types of loans, such as student default increases or HE revolving credit.
-once an account is charged off the balance seldom changes, even if payment is received or may be removed entirely if sold.
-balances calculated can be influenced on methodolgy used such as using 50% of the balance when measuring joint accounts for the individual sampled.
However, the report is a template and may have some flaws but again, it is and has been usefull to myself.
If I am reviewing the FRBNY chart correctly, balances are up slightly (actually volume is still historically high, albeit flat since 2011). But if you listen to the market, fresh debt volume is off 25% – 50%. Perhaps the drastic decline is primarily in credit card debt. Other emerging forms such as healthcare, student loans and possibly telecom/cable debt are making up the difference?
What is your view, is ARM Industry fresh debt volume down 25% – 50% from the start of 2011?