Installment Credit Dropped, Delinquencies Rose Last Year

Installment credit loans to consumers dropped and delinquencies rose in 1990, according to a study released on Thursday by the American Bankers Association.

Losses on consumer installment loan portfolios jumped to $3.7 billion last year, up from $3.3 billion in 1989, according to the group's annual loan survey of 447 banks. Almost one-third of the loan losses resulted from personal bankruptcies.

The amount of outstanding installment credit owed by consumers at yearend 1990 topped $750 billion, up from $731 billion in 1989. But the trade group noted that the rate of increase was weak.

Job Losses Takes Toll

Bankers said that the negative trends are continuing this year, punctuated by low levels of employment and skimpy consumer spending. In June, consumer credit outstanding dropped for the sixth time in seven months.

"In a time when the economy is slower, we would expect the growth rate in installment credit to mirror the economy," said Craig Schopf, a vice president in consumer lending at National Bank of Detroit.

The survey includes data on home mortgages, home equity lines of credit, auto loans, personal installment loans, and mobile home credit.

In 1990, consumers took on $259.4 billion in installment debt, a slight 2.3% increase in the growth from the previous year. The growth rate in 1989 was 8.3%.

Home Equity Loans Grow

The one bright spot in the survey was home equity loans, which bankers said continued to grow. Consumers are attracted to the product because it is one of the few remaining tax-advantaged consumer loans.

"That's the big driver," said Buck Harnage, executive vice president in charge of consumer credit at Barnett Banks Inc. in Jacksonville, Fla. "People are looking at the tax deductibility. It is also a product that is very much appreciated and pushed by the lenders."

A recent survey by the Consumer Bankers Association found that home equity portfolios of banks and thrifts grew an average of 12.6% in 1990.

On the delinquency front, the ABA survey found that small and medium-size institutions intensified efforts to renegotiate loans with customers.

At the same time, however, the number of large banks that renegotiated consumer credit dropped to 89.7% in 1990 from 95.3% in 1989.

The large banks successfully renegotiated consumer loans 51% of the time, while community banks were able to restructure consumer credit 63% of the time.

There is anecdotal evidence that as loan losses increase, an even greater number of banks will be working with delinquent borrowers.

"I think that more and more banks are beginning to get into restructuring and in-house counseling services," said Pasquale A. Castaldo, senior credit manager at Connecticut National Bank.

PHOTO : Banks Maintain Market Share

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