Consumer loan delinquencies have fallen to their lowest level in 20 years, but some economists are saying it is only a matter of time until credit quality begins to decline again.

The good news, mounting in earnest for the last two years, was reinforced on Friday by the American Bankers Association's release of first-quarter credit data. It showed that only 1.74% of a basket of closed-end loans were at least 30 days past due - lower than in any quarter since the trade group began compiling the data in 1974.

Cards Delinquencies Up

The news was slightly less good in credit card loans, which as open-end credits are not included in the composite statistic. Card delinquencies. edged upward to 2.54% from 2.49% at yearend 1993.

While that rate has seesawed in recent quarters, it was still 20 basis points better than in the first quarter of 1993 and well below the most recent peak of 3.34% in early 1991.

The card trend may be an indicator of what is to come in other consumer loans, as a resurgence of confidence leads to more borrowing and to the inevitable overextensions.

"Low delinquency rates bode well for growth in consumer credit," said ABA chief economist James Chessen.

But he added, "Low delinquency rates may not be sustainable. The recent surge in consumer credit to finance big-ticket items may cause an uptick in delinquencies later this year."

The composite indicator, taking into account data from ABA members on eight types of loans, fell for the eighth consecutive quarter. The cumulative decline was 101 basis points from the spike of 2.75% in the first quarter of 1992.

"Consumers have been on a debt-reducing diet and it has paid off," Mr. Chessen said.

He also noted that banks have been able to charge off many of their outstanding bad loans and have been adding higher-quality credits in their place.

Erin Fossett, domestic economist for First Chicago Corp., seconded Mr. Chessen's caution about the future. She said that the low delinquency levels won't last, because many consumers are merely substituting one form of debt for another.

Financial Squeeze

Low mortgage rates in recent years enabled consumers to refinance their homes and clear up credit card debt or other higher-interest loans. But higher mortgage rates, combined with chronically low personal saving rates and rising out-of-pocket costs of health care and insurance benefits, are pressuring the consumers to make ends meet.

"A lot of people are living close to the edge financially," said Ms. Fossett.

Ms. Fossett said there has been a slight rise in credit card debt because of rising demand and tough competition, with some banks willing to take more risks - hence delinquencies - to gain market share.

The 21% increase in total revolving credit in April - after the latest ABA statistics were compiled - "has to worry you a little," said Mr. Chessen. "I think it's something we have to watch carefully.

"If it increases over a couple of quarters, it's the first sign that delinquency will be on the rise," Mr. Chessen added.

Big-Ticket Items

Total consumer installment credit expanded at a seasonally adjusted 13.2% annual rate in April, to more than $8 billion, the largest monthly rise since March 1985, according to the Federal Reserve.

Mr. Chessen attributed the growth to consumers' buying bigger-ticket items like cars and pianos, and going on vacations - things that may be harder to afford and not customarily paid with cash.

He also mentioned that in April, around the income tax deadline, people might have required more credit to cover dayto-day needs.

Following the general trend, latenesses on direct and indirect auto loans fell slightly in the first quarter, to 1.53% and 1.64% respectively, from 1.58% and 1.65% in the 1993 fourth quarter. Those numbers have been falling steadily since the third quarter of 1992.

Of home equity loans, 1.51% were delinquent in the first quarter, down from 1.66% at yearend but up from 1.48% in the 1993 first quarter.

Delinquencies in other closed-end categories, seasonally adjusted, included 2.30% of personal loans, 3.60% of mobile homes, 1.28% of recreational vehicle, and 1.94% of home improvement.

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