Consumers Improve on Loan Payments for Second Quarter

10/10/2017 2:32 PM

Overall loan delinquencies remain below their 15-year averages; but consumers impacted by the recent hurricanes may have challenges with payments in the future.


Consumer delinquencies across several loan categories, including bank cards, improved in the second quarter this year; but the recent hurricanes may impact consumers’ finances in ways that have yet to be seen, according to the American Banker’s Association (ABA) and its latest Consumer Credit Delinquency Bulletin.

Delinquency rates in closed-end loans, such as auto and personal loans, remained stable in the second quarter while bank card delinquencies declined, according to a news release from the ABA.

“Overall, delinquencies fell in eight of the 11 individual consumer loan categories tracked by ABA,” it reports.

In the open-end loan category, delinquencies for bank cards declined seven basis points to 2.67 percent of all accounts and remain well below their 15-year average of 3.64 percent.

The composite ratio of delinquencies in eight closed-end loans (including for homes and vehicles) remained at 1.56 percent of all accounts—below the 15-year average of 2.16 percent, according to the ABA.

“We’re in the ninth year of economic expansion when you might expect the pendulum to begin swinging the other way, but delinquencies remain below historical levels as consumers continue to show great command of their finances,” James Chessen, ABA’s chief economist, said in the news release. “The outlook remains very positive, as the strong job market, growing wages and rising wealth provide the financial wherewithal for consumers to keep current on their financial obligations.” 

The ABA also finds that delinquencies in indirect auto loans, coordinated through a third party such as an auto dealer, increased just one basis point to 1.84 percent of all accounts, but also remain well below their 15-year average of 2.19 percent.

“Delinquencies in direct auto loans (those arranged directly through a bank) also rose one basis point to 1.04 percent of all accounts, remaining well under their 15-year average of 1.56 percent,” it reports.

Chessen said he is encouraged by the current economic conditions and consumer behavior and continues to be “cautiously optimistic amid uncertainty that lies ahead.”

“A strong economy and good consumer practices point toward steady delinquency levels in the near term, but we are also mindful that the hurricanes may have made repayment of debts challenging for consumers in the path of the storms,” Chessen said. “It will take several quarters to fully gauge the regional and nationwide impact the hurricanes will have on consumers’ financial footing.”

Delinquencies for home-related loans declined in three categories. Home equity loan delinquencies fell nine basis points to 2.5 percent of all accounts and home equity line of credit delinquencies declined four basis points to 1.07 percent of all accounts, according to the ABA. In the third category, property improvement loan delinquencies fell 3 basis points to 0.95 percent of all accounts, well below their 15-year average of 1.33 percent.

“Home equity-related delinquencies fell across the board as the housing market continued to improve, and they’re now back down to levels last seen in 2008,” Chessen said. “Increased property values and greater home equity have provided a strong incentive for people to remain current on their home loan obligations.” 

Delinquencies, defined by the ABA as a late payment that is 30 days or more overdue, declined in most of the closed-end loan categories and in all of the three open-end loan categories compared to the first quarter:

Closed End Loans:

  • The composite ratio remained at 1.56 percent.
  • Home equity loan delinquencies declined from 2.59 to 2.5 percent.
  • Direct auto loan delinquencies increased from 1.03 to 1.04 percent.
  • Indirect auto loan delinquencies increased from 1.83 to 1.84 percent.
  • Marine loan delinquencies declined from 1.02 to 0.95 percent.
  • Mobile home delinquencies increased from 4.86 percent to 5.08 percent.
  • Personal loan delinquencies declined from 1.54 percent to 1.52 percent.
  • Property improvement loan delinquencies declined from 0.98 percent to 0.95 percent.
  • RV loan delinquencies declined from 1.02 percent to 0.93 percent.

Open End Loans:

  • Home equity lines of credit delinquencies declined from 1.11 percent to 1.07 percent.
  • Bank card delinquencies declined from 2.74 percent to 2.67 percent.
  • Non-card revolving loan delinquencies declined from 1.64 percent to 1.59 percent.

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