Credit Card Late Payments Drop in Q4 Along with Other Loans

Consumer loan delinquencies fell in most loan categories in the fourth quarter of 2009, marking the second quarter in a row of broad-based improvement, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.

The composite loan delinquency ratio, which tracks eight closed-end installment loan categories, fell four basis points to 3.19 percent of all accounts compared from 3.23 percent of all accounts in the previous quarter. Bank card delinquencies fell 38 basis points to 4.39 percent of all accounts which is below the five-year average (4.52 percent).

The ABA report defines a delinquency as a late payment that is 30 days or more overdue. The Bulletin’s data is based on a quarterly survey of 300 banks nationwide that, taken together, offer a representative panorama of the banking industry.

ABA Chief Economist James Chessen said the news is a strong indication that the economy is on an upswing.

“The fall in consumer delinquencies is a very positive and hopeful sign. Clearly, consumers are shoring up their finances and banks are putting losses behind them. Overall, there is a prudent approach to credit,” he said.

Housing-related loans showed mixed results. Home equity loan delinquencies hit another record, rising to 4.32 percent of all accounts compared to 4.30 percent in the previous quarter. By contrast, home equity lines of credit delinquencies at quarter-end fell for the first time in six quarters to 2.04 percent of all accounts compared to 2.12 percent in the previous quarter.

“This first sign of improvement has been a long time coming and is finally some positive indication that the housing market is stabilizing,” Chessen said.

Chessen says that while most consumers appear to be handling their finances well, the level of consumer credit delinquencies is still heavily tied to job creation.

“People are actively reducing their level of debt relative to their income and are rebuilding their savings,” Chessen said. “But it’s still a very stressful time for many families and this won’t disappear until more people have jobs. This will keep delinquencies elevated for the next several quarters.”

CLOSED-END LOANS

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

Decreased Delinquencies:

• Direct auto loan delinquencies fell from 2.04 percent to 1.94 percent.
• Marine loan delinquencies fell from 2.21 percent to 1.63 percent.
• Mobile home loan delinquencies fell from 3.63 percent to 3.41 percent.
• Personal loan delinquencies fell from 3.74 percent to 3.63 percent.
• Property improvement loan delinquencies fell from 1.66 percent to 1.63 percent.
• RV loan delinquencies fell from 1.64 percent to 1.44 percent.

Unchanged Delinquencies:

• Indirect auto loan delinquencies remained at 3.15 percent.

Increased Delinquencies:

• Home equity loan delinquencies rose from 4.30 percent to 4.32 percent.

OPEN-END LOANS

In addition, ABA tracks three open-end loan categories:

Decreased Delinquencies:

• Home equity lines of credit delinquencies fell from 2.12 percent to 2.04 percent.
• Bank card delinquencies fell from 4.77 percent to 4.39 percent.

Increased Delinquencies:

• Non-card revolving loan delinquencies increased from 1.40 percent to 1.46 percent.