In a sign that the U.S. economy continues its modest recovery, consumer loan delinquencies showed broad-based improvement in the first quarter, for the third quarter in a row, the American Bankers Association said Wednesday, July 7, in a news release detailing the ABA's recent delinquency findings.
According to the ABA's Consumer Credit Delinquency Bulletin, the composite ratio fell 21 basis points to 2.98% of all accounts from 3.19% of all accounts in the previous quarter. The ratio tracks delinquencies in eight closed-end installment loan categories. Closed-end loans are loans for a fixed amount of money with a fixed repayment period and regularly scheduled payments.
In addition, bank card delinquencies fell below the 15-year average of 3.93% to 3.88% of all accounts. This is the first time since the second quarter of 2002 that bank card delinquencies have fallen below 4%. The ABA, which represents banks of all sizes and charters in the nation's $13 trillion banking industry, defines a delinquency as a late payment that is 30 days or more overdue.
ABA Chief Economist James Chessen said in the release that the improvements reflect concerted efforts by consumers to shore up their finances. "It's clear that consumer balance sheets are improving. People are borrowing less, saving more and building wealth. These are all positive signs," Chessen said.
A Federal Reserve chart of revolving consumer credit growth accompanying the ABA release shows the inverse relationship of revolving credit to joblessness over the last four years. As the unemployment rate has risen to its current rate of about 10%, revolving credit has in turn dropped to a growth rate of nearly zero.
Chessen also noted that across-the-board improvements in housing-related loan delinquencies indicate stability is returning to the housing market. "This is the first inkling that stability is taking hold in the housing market, but the pace of recovery will still be long and drawn out," he said.
Other data from the ABA bulletin show that home equity loan delinquencies fell for the first time in two years to 4.12% of all accounts from 4.32% in the previous quarter. Home equity lines of credit delinquencies fell to 1.81% of all accounts from 2.04% in the previous quarter. Property improvement loan delinquencies fell to 1.40% of all accounts from 1.63% in the previous quarter.
Read a story about the U.S. banking system in summer 2009 from the archives of InvestmentAdvisor.com.