Late Payments in Most Consumer Loan Categories Improve While Credit Card Delinquencies Rise

July 03 2006

The news about consumer loan delinquencies was mixed during the first quarter of 2006, according to the American Bankers Association's Consumer Credit Delinquency Bulletin. The bulletin is a quarterly survey of more than 300 banks nationwide reporting on the percentage of consumer loans that are 30 days or more past due.

"Overall the financial picture is good, which is reflected in improved delinquencies in most consumer loan categories," said James Chessen, ABA's chief economist. The composite ratio, which tracks late payments in eight types of closed-end installment loans, fell to 1.94 percent from 2.02 percent of accounts (seasonally adjusted) at the end of 2005.

But after a two-quarter drop, credit card late payments increased to 4.40 percent at the beginning of 2006, from 4.27 percent (seasonally adjusted) in the previous quarter.

"Credit card loan payments are sensitive to financial pressures. As gas prices eased at the end of 2005, so did credit card late payments," Chessen said. "But the favorable gas-price effect evaporated during the first quarter of 2006 and it's no wonder why. The Federal Reserve continues to raise interest rates and high energy prices are taking a bite out of disposable income."
Chessen noted that recent trends in consumer finances provide more insight into delinquency trends. "Not since the Great Depression has the national savings rate remained below zero for so long. Absent savings to cushion financial stress, some consumers end up missing a payment on their credit card loan," he said.

The first quarter composite ratio delinquencies are as follows:

Consumers are advised to review their finances every year and watch for the warning signs of being overextended on credit:

Actions / Tips for those having trouble paying down their debts and to solve debt problems :

Source: Press Release