Loan Delinquencies Hit Record High Last Year
Job Losses Hurt Consumers' Ability to Pay
|
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Thursday, January 8, 2009
Delinquencies on auto loans and home equity lines of credit reached their highest levels on record during the third quarter of 2008, the American Bankers Association reported yesterday.
Indirect auto loans, which are arranged through a third party such as a dealer and account for 90 percent of all auto loans, hit a delinquency level of 3.25 percent, up 18 basis points from the previous quarter.
Delinquencies on home equity lines of credit rose 7 basis points to 1.15 percent during the third quarter, the latest period for which data were available, the association said in its Consumer Credit Delinquency bulletin. Delinquencies are payments that are 30 days or more overdue.
"The number one factor in rising consumer credit delinquencies is job losses," James Chessen, ABA chief economist, said. "With one million jobs lost in the first three quarters and 2 1/2 million expected for the year, delinquencies of all types of consumer loans will likely increase in the coming quarters."
Charles McMillion, president and chief economist of MBG Information Services, a District-based business forecasting firm, also pointed out that the credit crunch has limited consumers' ability to find other ways to pay down their debt.
The delinquencies, he said, "were the result of the freezing up of credit markets and therefore the inability of consumers to refinance their homes or otherwise use new debt to service the old debt."
Nonetheless, the association found that delinquencies on credit cards issued by banks dropped 34 basis points to 4.2 percent.
Chessen attributed that decrease to consumers fearful of taking on more debt in a precarious job market.
"For those who are still able to meet their obligations, who have good sources of income, we're seeing a more concerted approach to credit. They're bringing down balances, they're trying to limit how much they're putting on their cards," he said.
Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said consumers have also learned the dangers of being delinquent on credit cards. Card issuers often charge exorbitant fees and are quick to raise interest rates on delinquent borrowers.
"Being delinquent on a credit card means the sky is the limit for your punishment, and people have learned that," he said.
