Consumer loan delinquencies hit a four-year low in the second quarter, according to the American Bankers Association.

In its quarterly survey, regarded as a benchmark of consumer credit quality, the association found that 3.33% of credit card accounts were at least 30 days delinquent on June 30, down from 3.58% three months earlier.

Improvement was also pronounced in home equity loans. Delinquencies on these fell 10 basis points, to 1.19%, the lowest since the ABA began tracking that category in 1983.

A composite measure that takes in eight types of closed-end loans and therefore excludes credit cards improved to 2.09%, down 23 basis from the first quarter and the lowest since 1.98% in the third quarter of 1995.

Economists credited the confluence of a strong economy, low unemployment, and banks' tightening of lending standards. Some economists said it is unlikely that delinquency rates could decline much further.

"We expected good performance -- this is exceptionally good performance," said James Annable, director of economics at Bank One Corp. in Chicago.

Mr. Annable said the economy "is in a sweet spot for the consumer." Incomes are up and many households are flush after home refinancings. He also gave banks credit for using improved credit scoring techniques and making other "advances in underwriting."

"The external environment is the principal reason, but this is really better than the external environment alone can justify," Mr. Annable said.

Experts said lower delinquencies are evidence that banks learned lessons from the turbulence of 1996 and 1997, when late payments -- particularly on credit card loans -- seemed to be rising uncontrollably. Card delinquencies peaked at 3.72% of accounts in the fourth quarter of 1996, as did the percentage of delinquent dollars in card loans, at 5.45%.

In the second quarter of this year, the percentage of delinquent card-account dollars declined to 4.10% from 4.44% in the first quarter and 4.57% in the second quarter of 1998. In home equity, the dollar proportion dropped to 0.55%, from the first quarter's 0.69%. A year earlier it was 0.72%.

The composite ratio for delinquent dollars was 1.60%, down from 1.68% in the first quarter and 1.83% in the second quarter of 1998.

ABA senior economist Keith Leggett called the overall picture "a fairly substantial improvement. A rising tide lifts all boats (and) has basically lifted or improved the numbers across the board."

Mr. Leggett said low-income consumers' higher wages are "really helping them get their finances in order." In general, "consumers are becoming much more savvy with regard to their finances, and they're looking at ways to lower their debt burden."

Meanwhile, the drop in credit card delinquencies shows that "the industry has taken a more proactive approach" to troublesome accounts, Mr. Leggett said. "That's a reflection of how we've been able to harness technology and do a better job with monitoring" account performance.

Don Hilber, a Minneapolis-based corporate economist with Wells Fargo & Co., said the record lows in home equity are particularly striking. That category "helps drive down the overall delinquency" rate, he said.

A wave of home refinancing has run its course because of rising interest rates. Over time, "more and more loans are getting shifted over to home equity lines, so it's becoming a larger proportion of consumer credit," Mr. Hilber said. Thus, he said, low delinquencies in that category are a strong indicator of consumer financial health.

Brian A. Nottage, senior economist at Regional Financial Associates, a consulting firm in West Chester, Pa., gave a nod to credit card companies. Though they are "still aggressively courting accounts" with mail solicitations, they are "clearly tightening up on who they're courting."

Credit card issuers still face problems -- such as consumer resistance to fees and the driving-down of interest rates because of competition -- but the repayment problems that loomed large three years ago seem to be ebbing.

Speaking Monday when the Federal Deposit Insurance Corp. released its report on the banking industry's second-quarter profits, FDIC Chairman Donna Tanoue cited a drop in the chargeoff rate for credit card loans to 4.25% from 4.93% in the first quarter and 5.41% a year before. The most recent number was the lowest since the first quarter of 1996 and represented "a significant improvement in asset quality," Ms. Tanoue said.

A Sept. 7 report on the credit card industry by Fitch IBCA, the New York-based rating agency that tracks chargeoffs in securitized portfolios, was similarly positive. "From a credit quality standpoint, scant evidence exists that issuers' near-term pressures are tied to anything other than the slowdown in receivables growth," the report said.

Mr. Annable of Bank One said past credit quality problems injected a "degree of necessary humility in underwriting" among credit card lenders. "People realized that this wouldn't take care of itself," he said, so "new technology was applied, and there was less inclination to push the limits on the process."

As for the second-quarter results, "we're not to the end of this cycle yet, and we could get back to" less favorable conditions, but "boy, it doesn't get much better than this," Mr. Annable said.

Mr. Nottage predicted that credit quality will remain "pretty good" through yearend, with no "serious deterioration." After that, he said, "we expect you'll see some modest reversal in this trend. The improvement has largely played out."

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