Credit Card and Auto Loan Delinquencies Spike

Consumer credit delinquencies were mixed in the fourth quarter, with delinquencies falling in six of the 11 categories tracked by ABA. However, the American Bankers Association’s Consumer Credit Delinquency Bulletin also showed that delinquencies rose in five categories.

The composite ratio, which tracks overall delinquencies, fell nine basis points to 1.78% 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,” said James Chessen, ABA’s chief economist. “Consumers’ financial health overall remains solid, supported by a strong job market and continued wage growth.”

In the fourth quarter of last year, 3.22% of bank-issued credit card loans were at least 30 days late, which was higher than at any point since 2011, the data from the American Bankers Association showed.  They remain well below the pre-recession average of 4.33%.

“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.

Delinquencies in direct auto loans fell eight basis points to 1.08% 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% 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.”

Source:  ABA/National Mortgage News