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Loan Payment Delinquencies RiseCredit problems spread to auto loans, cedit cards |
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April 4, 2008
Delinquencies in the fourth quarter of 2007 reached their highest levels since 1992, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. The composite ratio, which tracks eight closed-end installment loan categories, rose 21 basis points to 2.65 percent of all accounts in the fourth quarter (seasonally adjusted). All eight loan categories experienced increased delinquencies during the fourth quarter, a rare occurrence. The ABA report defines delinquency as late payments that are 30 days or more overdue. James Chessen, ABA chief economist, attributed the rise largely to auto loan delinquencies. The auto loan category comprises about two-thirds of all closed-end consumer installment loans. In addition, the number of delinquent bankcard accounts rose to 4.38 percent, but remains close to the five-year average of 4.40 percent. “The rise in consumer credit delinquencies is consistent with a rapidly slowing economy,” Chessen said. “Stress in the housing market still dominates the story but it’s a broader tale of an overall weak economy.” The weak housing market continues to be reflected in rising delinquency rates for home equity loans and lines of credit. Delinquencies for home equity lines of credit -- the lowest delinquency rate category -- rose to 0.96 percent. The fourth quarter composite ratio is made up of the following closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
No reliefChessen predicted that delinquencies will continue to rise during the first half of 2008. “No relief for consumers is in sight as food and gas prices remain stubbornly high and income growth is anemic,” Chessen said. Chessen recommends that borrowers experiencing financial stress seek out their lenders promptly as more options are likely to be available when the problem is addressed early. ABA advises consumers to review their finances often and watch for the warning signs of overextended credit:
For others having trouble paying down debts, ABA advises taking action -- sooner rather than later -- by following these tips:
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