The first quarter of 2018 saw installment loan and bank card delinquencies resume a slow return to normal levels after falling across the board in the previous quarter, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.
The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 9 basis points to 1.73 percent of all accounts. That remains well below the 15-year average of 2.14 percent. (See Historical Graphic.) The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
“Delinquencies have been so low for so long that it is not surprising to see them ease back toward more normal levels,” said James Chessen, ABA’s chief economist. “We are still well below the 15-year average, but consumers should always maintain a cautious approach to credit. More jobs and better wages continue to be the key factors in keeping delinquencies low, and the economic fundamentals remain positive. Solid budget management remains very important, particularly with higher electric bills to keep cool in the summer heat and rising gas prices.”
After falling 16 basis points the previous quarter (the lowest quarter-end level in three years), delinquencies in bank cards (credit cards provided by banks) posted a 60 basis point increase to 3.06 percent of all accounts, still well below their 15-year average of 3.56 percent.
“Bank card delinquencies have been near historical lows for five years as consumers have done a great job managing their levels of debt,” Chessen said. “The ratio of credit card debt to disposable income remains low and is nowhere near pre-crisis levels.” (See Economic Charts.)
Chessen added that the first quarter’s increase in the bank card delinquency rate could be attributed to a significant moderation in revolving credit growth that quarter.
Delinquencies edged up in two home-related categories and fell slightly in another. After falling 14 basis points the previous quarter, home equity loan delinquencies rose 3 basis points to 2.31 percent of all accounts, remaining significantly below their 15-year average of 3.01 percent. Property improvement loan delinquencies rose 12 basis points to 1.16 percent of all accounts, remaining well below their 15-year average of 1.28 percent. Home equity line of credit delinquencies fell 2 basis points to 1.14 percent of all accounts, remaining under their 15-year average of 1.21 percent.
Delinquencies in direct auto loans (those arranged directly through a bank) rose 3 basis points to 1.10 percent of all accounts, remaining well under their 15-year average of 1.49 percent. Delinquencies in indirect auto loans (those arranged through a third party such as an auto dealer) rose 15 basis points to 1.93 percent of all accounts, remaining well below their 15-year average of 2.19 percent.
Chessen expects delinquency levels to follow the lead of the economy as consumers remain financially disciplined.
“Banks will continue a conservative approach to credit extension, and we hope that consumers will maintain their vigilant efforts to manage debt and ensure they can handle the economic conditions, year in and year out,” Chessen said.
The first quarter composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
- Composite Ratio rose from 1.64 percent to 1.73 percent.
- Direct auto loan delinquencies rose from 1.07 percent to 1.10 percent.
- Indirect auto loan delinquencies rose from 1.78 percent to 1.93 percent.
- Home equity loan delinquencies rose from 2.28 percent to 2.31 percent.
- Marine loan delinquencies rose from 0.76 percent to 0.80 percent.
- Mobile home delinquencies rose from 4.48 percent to 5.09 percent.
- Personal loan delinquencies rose from 1.57 to 1.65 percent.
- Property improvement loan delinquencies rose from 1.04 percent to 1.16 percent.
- RV loan delinquencies rose from 0.73 percent to 0.78 percent.
In addition, ABA tracks three open-end loan categories:
- Home equity lines of credit delinquencies fell from 1.16 percent to 1.14 percent.
- Non-card revolving loan delinquencies fell from 1.62 percent to 1.56 percent.
- Bank card delinquencies rose from 2.46 percent to 3.06 percent.
For borrowers having trouble paying down debts, ABA advises taking action — sooner rather than later — to solve debt problems. Proven tips are listed below. Additional consumer information on budgeting, saving, managing credit and more is available at ABA.com/Consumers.
- Talk with creditors – the sooner you talk to them, the more options you have;
- Don’t charge more purchases until your problems are solved;
- Avoid bankruptcy – it’s a short-term solution with long-term consequences; and
- Contact Consumer Credit Counseling Services at 1-800-388-2227.
Indirect auto loan: loan arranged through a third party such as an auto dealer.
Direct auto loan: loan arranged directly through a bank.
Delinquency: late payment that is 30 days or more overdue.
Bank card: a credit card provided by a bank.
Closed-end loan: a loan for a fixed amount of money with a fixed repayment period and regularly scheduled payments.
Open-end loan: a loan with a fixed amount of available credit but a balance that fluctuates depending on usage such as a line of credit.
Non-card revolving loan: an unsecured, open-end loan that is not linked to a credit card. Examples may include lines of credit for overdraft protection or check credit.