Past-due consumer loans at 15-year high

WASHINGTON – Overdue consumer debt mounted in the fourth quarter to the highest level in 15 years, according to a report today by the American Bankers Association.

“The rise in consumer credit delinquencies”– accounts at least 30 days past due – “is consistent with a rapidly slowing economy,” James Chessen, the group’s chief economist, said in a statement today. “Stress in the housing market still dominates the story, but it’s a broader tale of an overall weak economy.”

The trade group’s composite index tracking delinquencies in fixed-period consumer loans rose 21 basis points to 2.65 percent.

In “a rare occurrence,” the ABA said, late payments rose in all eight categories. But auto loans accounted for most of the overall total, Chessen said. That loan category, comprising about two-thirds of U.S. closed-end consumer loans, had the highest delinquency rate and was one of the fastest-rising during the period, ABA figures show.

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The fixed-period loan categories, and their delinquency rates, were:

• Indirect auto loan delinquencies rose 27 basis points, to 3.13 percent from the previous 2.86 percent.

• Mobile home loan delinquencies increased 5 basis points to 2.92 percent.

• Personal loan delinquencies rose 19 basis points to 2.48 percent.

• Home equity loan delinquencies increased 11 basis points to 2.39 percent.

• Direct auto loan delinquencies rose 9 basis points to 1.90 percent.

• Property-improvement loan delinquencies increased 21 basis points to 1.81 percent.

• Marine loan delinquencies rose 27 basis points to 1.57 percent.

• Recreational vehicle loan delinquencies increased 19 basis points to 1.08 percent.

Among open-end loans, the delinquency rate for bank-card accounts “rose 20 basis points in the fourth quarter to 4.38 percent, but remains close to the five-year average of 4.40 percent,” the ABA said. The rate was lowest for home equity lines of credit, which saw delinquencies rise 12 basis points to 0.96 percent.

“It’s an indication of the degree of stress consumers are facing right now,” Nigel Gault, director of U.S. research at Global Insight Inc. in Lexington, Mass., told Bloomberg News. “People overextended themselves – they took out loans they thought weren’t a problem as long as house prices kept rising.”

The ABA’s Chessen predicted that delinquencies will continue to rise in 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,” he said.

The American Bankers Association is a trade group for charters and banks of all sizes. It member institutions represent more than 95 percent of the industry’s $12.7 trillion in assets and employ more than 2 million people. For additional information – including an exceprt of the ABA’s latest Consumer Credit Delinquency Bulletin (the full report is members-only) – visit www.aba.com.

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