Consumer credit delinquencies a mixed bag in fourth quarter

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Consumer credit delinquencies were mixed in the fourth quarter, with delinquencies falling in six of the 11 categories tracked by ABA and rising in five categories, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin.

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The composite ratio, which tracks overall delinquencies, fell nine basis points to 1.78 percent of all accounts.

“The delinquency trends we’re seeing are typical of what happens at this stage in the business cycle, particularly as it relates to auto and credit card delinquencies,” James Chessen, ABA’s chief economist, said. “Consumers’ financial health overall remains solid, supported by a strong job market and continued wage growth.”

Delinquencies in bank cards, which are credit cards provided by banks, jumped 17 basis points to 3.22 percent of all accounts in the fourth quarter. They remain well below the pre-recession average of 4.33 percent.

“Delinquencies remain low by historical standards, reflecting continued prudent use by card holders who have kept their balances remarkably low relative to their disposable incomes,” Chessen said. “A key factor has been the Fed, which has raised rates seven times over the last two years. This has increased the cost of credit, which translates into fewer loans and somewhat higher delinquencies.”

Delinquencies fell in all three home-related categories. Home equity line of credit delinquencies fell five basis points to 1.09 percent of all accounts, home equity loan delinquencies fell one basis point to 2.52 percent of all accounts, and property improvement loan delinquencies fell two basis points to 1.12 percent of all accounts.

Delinquencies in direct auto loans, which are arranged directly through a bank, fell eight basis points to 1.08 percent of all accounts. Delinquencies in indirect auto loans, which are arranged through a third party such as an auto dealer, rose nine basis points to 2.08 percent of all accounts.

“Banks remain vigilant in their underwriting approach,” Chessen said. “The Fed has put further rate increases on hold unless there are clear signs of inflation, and that in part recognizes the tightening of credit across some key markets. Consumers remain on strong financial footing, and continuing their strong track record of spending within their means is the best approach to meeting all of their obligations.”

The fourth quarter composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts

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