Consumer Credit May Be Next Flashpoint

Just as the pace of commercial loan defaults slows, banks might find themselves on the brink of another problem: deteriorating consumer loan portfolios.

Lenders that are heavily involved in consumer-related business lines such as credit cards, mortgages, or auto loans can expect consumer credit erosion to become a concern, industry analysts say. Low consumer confidence, heavy layoffs, and an increase in personal bankruptcies are fueling the consumer credit deterioration, according to Lori Appelbaum, an analyst at Goldman, Sachs & Co. who has been monitoring the lending business closely since the middle of last year.