Consumer Delinquencies Fall to Record Lows: ABA

As the U.S. economy shows signs of greater strength, a small rise in consumer delinquencies early last year is looking more like a blip than the start of a sustained trend.

During the third quarter of 2013, a composite ratio of consumer delinquencies tracked by the American Bankers Association fell to a record low of 1.63%, the trade group said Thursday.

The composite index — which includes delinquencies on auto loans, personal loans, and home equity loans — was down from 1.76% in the second quarter and 1.70% in the first three months of the year.

James Chessen, the ABA's chief economist, attributed the positive third-quarter results largely to rising house prices and overall improvements in the U.S. economy.

"More jobs and higher income are a recipe for lower delinquencies," Chessen said in a news release. He added that rising home prices "have relieved some of the pressure on home equity loans and home equity lines of credit."

Chessen sounded more bullish about the U.S. economy Thursday than he was three months ago, when he described the job market as weak and incomes as stagnant. He now expects continued improvement in jobs, incomes and the overall economy.

On Wednesday, the Federal Reserve Board reported that U.S. consumer credit outstanding grew at a seasonally adjusted annual rate of 4.8% in November. That's a smaller growth rate than was recorded during most of last year, but still a major improvement from the depths of the Great Recession.

U.S. consumer delinquencies have fallen fairly steadily since 2009, when the composite index peaked above 3%. The index's 15-year average is 2.35%, according to the ABA, which defines a delinquency as a payment that is 30 days or more overdue.

Delinquencies on bank-issued credit cards are not included in the composite index, and they rose from 2.42% in the second quarter to 2.55% in following three months. That followed a one-basis-point increase during the prior quarter.

"While bank card delinquencies saw a slight uptick, rates are still more than 30% below their 15-year average," Chessen said in the news release. "It will be difficult for bank card delinquencies to improve further when they are already at such low levels."

Chessen predicted that consumer delinquencies will continue to see small fluctuations in the coming months.

"Delinquencies are likely to remain at reasonably low levels for the next several quarters," he said. "At the same time, consumers can't afford to be complacent when it comes to keeping debt levels under control."