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Consumer Delinquencies Rise in First Quarter

More late payments on home equity loans, credit cards



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Sluggishness in the overall economy contributed to an increase in the delinquency rates for home equity lines of credit (HELOC) and bankcards during the first quarter of 2008, according to the American Bankers Association.

The percentage of credit-line accounts that were more than 30 days past due rose to 1.10 percent during the first quarter -- the highest recorded rate for this category since 1997, although the delinquency rate remains lower than all other consumer credit categories.

In the same period, bankcard delinquencies rose to 4.51 percent -- slightly above the five-year average delinquency rate of 4.40 percent for this category.

ABA chief economist James Chessen said more consumers are having trouble meeting their obligations because of the confluence of anemic personal income growth, falling home equity and stock values, job losses, and rising food and energy prices.

"It was a tough quarter for some people," Chessen said. "Faced with rising food and gas prices and little income growth, fewer resources have been available to manage debt."

Some categories showed delinquencies improving. The composite ratio, which tracks eight closed-end installment loan categories, fell to 2.62 percent. This was largely due to a decline in indirect auto loan delinquencies, which fell 4 basis points to 3.09 percent. The ABA report defines delinquency as late payments that are 30 days or more overdue.

The first quarter composite ratio is made up of the following closed-end loans:

• Home equity loan delinquencies fell from 2.39 percent to 2.34 percent.

• Property improvement loan delinquencies fell from 1.81 percent to 1.78 percent.

• Indirect auto loan delinquencies fell from 3.13 percent to 3.09 percent.

• Marine loan delinquencies increased from 1.57 percent to 1.75 percent.

• RV loan delinquencies increased from 1.08 percent to 1.11 percent.

• Mobile home delinquencies increased from 2.92 percent to 3.22 percent.

• Direct auto loan delinquencies increased from 1.90 percent to 1.92 percent.

• Personal loan delinquencies increased from 2.48 percent to 2.55 percent.

Chessen said that individuals will see little relief in the near future and, as a consequence, delinquencies will remain elevated. "The tax stimulus is helping to boost personal income, but persistently high gas and food prices will eat away at overall resources," he said.

Chessen advised consumers to look for warning signs of financial problems and take action quickly.

"Any borrowers on the verge of financial stress should seek out their lenders immediately, as more options are likely to be available when problems are addressed early," Chessen urged. "Ignoring the problem always makes it harder to resolve."

Warning signs of overextended credit include:

• Paying only the minimum payment month after month;

• Being out of cash constantly;

• Being late on important payments such as rent or mortgage;

• Taking longer and longer to pay off balances; and

• Borrowing from one lender to pay another.

For others having trouble paying down debts, ABA advises taking action -- sooner rather than later -- by following these tips:

• Talk with creditors -- hiding only makes the problem worse;

• Don't charge more purchases until your problems are solved;

• Avoid bankruptcy -- it's a short-term solution with long-term consequences.



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