Consumer Credit Delinquencies Near 6-Year Low, Says ABA

U.S. consumer-loan delinquencies dropped to their lowest level in nearly six years during the second quarter of 2012 as households prioritized debt service over spending increases, the American Bankers Association said.

Delinquencies across eight loan categories fell a total of 11 basis points to 2.24 percent of all accounts in the second quarter, the best showing since the fourth quarter of 2006, when the rate was 2.23 percent. The rate has now been below the 15-year average of 2.40 percent for two consecutive quarters, the ABA said in its Consumer Credit Delinquency Bulletin.

“Consumers are saving more and borrowing less as they work to pay down debt at a faster rate,” James Chessen, the Washington-based group’s chief economist, said in a statement. “Economic uncertainty has made consumers hesitant to take on new debt, and building a stronger financial base has become a priority.”

Delinquencies on bank card debt fell from 3.08 percent of all accounts in the first quarter to an 11-year low of 2.93 percent, and well below the 15-year average of 3.91 percent.

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

The broad decline masked a rise in delinquencies in some categories, including home equity loans and lines of credit, and direct auto loans. Home equity loan delinquencies rose 9 basis points to 4.09 percent over the first quarter, while those for lines of credit spiked 13 basis points to 1.91 percent, and direct auto loans climbed 6 basis points to 2.34 percent.

A basis point is 0.01 percentage point.

“The lack of broad-based improvement gives us pause about the future,” Chessen said. “The economy experienced turbulence in the second quarter. Slow job growth and continued uncertainty means many consumers will face challenges managing their debt going forward.”

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