Report: Consumer delinquencies fall across the board

Consumer delinquencies declined across the board in the second quarter amid faster jobs growth and an overall improving economy, a new survey showed Tuesday.

The number of late payments fell in nine out of 11 categories in the April-June quarter, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.


The composite ratio, which tracks delinquencies in eight closed-end installment loan categories such as auto and personal loans, fell 6 basis points to 1.57 percent, a record low that is well below the 15-year average of 2.32 percent.

“Strong job growth, rising income, low interest rates and falling debt levels have led to consumers having a greater capacity to repay debt,” said James Chessen, ABA’s chief economist.

Chessen said consumers have made great strides since the recession in keeping their debt levels lower.

The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

Meanwhile, credit card delinquencies were flat, falling 1 basis point to 2.43 percent, after a big drop in the first quarter.  

They also remain well below their 15-year average of 3.79 percent.

"Consumers are thinking twice before increasing their level of debt, with many using credit cards as a payment vehicle rather than a tool to finance purchases,” Chessen said.

“The economy’s slow march forward has put consumers in a better financial position to meet their obligations, and banks will continue to extend credit to a growing number of qualified borrowers as the economy improves.”

Delinquencies in all three home-related categories — property improvement loans, home equity loans and home equity lines of credit — also fell in the second quarter.

“Home-related delinquencies are moving in the right direction, mirroring the slow recovery in housing,” Chessen said.

“Rising home prices in many communities have helped shore up the value of many families’ most important investment, helping to rebuild wealth and ease pressure on consumers.”

Chessen said that delinquencies are likely to remain close to their current levels in the months ahead as the economy growing and consumers continue prudent management of their finances.

"Continued job growth is the most important factor behind keeping delinquencies at these historically low rates," Chessen said.  

“Getting more people back to work and increasing household income is critical to a healthy economy and the ability to meet financial obligations.  While challenges clearly remain, continued vigilance by consumers in managing their debt is the best protection against rising delinquencies.”