US ABA: Econ Uncertainty To Make Consmrs Hesitant Re New Debt

Thursday, 04/10/2012 | 08:10 GMT

WASHINGTON (MNI) – The American Bankers Association Thursday said
consumer delinquencies continued to decline in the second quarter of
2012, with bank card delinquencies falling to 11-year lows “as consumers
shore up their financial base in an uncertain economy.”

The composite ratio, which tracks delinquencies in eight closed-end
installment loan categories, fell 11 basis points to 2.24% of all
accounts in the second quarter, below the 15-year average of 2.40%.

The following is the full text of details provided by the ABA:

Consumer delinquencies continued to decline in the second quarter
of 2012, with bank card delinquencies falling to 11-year lows as
consumers shore up their financial base in an uncertain economy,
according to results from the American Bankers Association’s Consumer
Credit Delinquency Bulletin.

During the second quarter, bank card delinquencies dropped below
three percent of accounts for the first time since 2001, falling 15
basis points to 2.93 percent of all accounts and well below the 15-year
average of 3.91 percent.

The composite ratio, which tracks delinquencies in eight closed-end
installment loan categories, fell 11 basis points to 2.24 percent of all
accounts in the second quarter, below the 15-year average of 2.40
percent. The ABA report defines a delinquency as a late payment that is
30 days or more overdue.

James Chessen, ABA’s chief economist, attributed the improvement to
continued efforts by consumers to manage their finances.

“Consumers are saving more and borrowing less as they work to pay
down debt at a faster rate,” Chessen said. “Economic uncertainty has
made consumers hesitant to take on new debt, and building a stronger
financial base has become a priority.”

While Chessen found the continued decline encouraging, the report
didn’t reflect the kind of comprehensive improvement across categories
seen in the first quarter.

“The lack of broad-based improvement gives us pause about the
future,” Chessen said. “The economy experienced turbulence in the
second quarter. Slow job growth and continued uncertainty means many
consumers will face challenges managing their debt going forward.”

Chessen also noted that delinquencies in all three categories of
home-related loans rose in the second quarter.

“While the housing market appears to have turned a corner, we are
many quarters away from seeing improvement filter through to reduce
home-related delinquencies,” Chessen said.

Chessen said consumers should be congratulated on their prudent and
cautious behavior toward credit, particularly given the uncertainty they
face.

“Good financial planning is the best defense against inevitable
economic bumps in the road that lie ahead,” he said. “The economic path
is far from certain as Europe continues to struggle and big decisions
are needed to deal with the looming U.S. debt cliff.”

Looking forward, Chessen believes that the future outlook depends
on a growing economy with stronger job growth.

“A robust economy is the best protector against increased
delinquencies,” Chessen said.

The second quarter 2012 composite ratio is made up of the following
eight closed-end loans. All figures are seasonally adjusted based upon
the number of accounts.

CLOSED-END LOANS

– Personal loan delinquencies rose from 2.01 percent to 2.15
percent.

– Direct auto loan delinquencies rose from 0.86 percent to 0.92
percent.

– Indirect auto loan delinquencies fell from 2.41 percent to 2.23
percent.

– Mobile home delinquencies fell from 3.25 percent to 3.15 percent.

– RV loan delinquencies rose from 1.11 percent to 1.15 percent.

– Marine loan delinquencies rose from 1.44 percent to 1.53 percent.

– Property improvement loan delinquencies rose from 0.83 percent
to 0.90 percent.

-Home equity loan delinquencies rose from 4.00 percent to 4.09
percent.

In addition, ABA tracks three open-end loan categories:

OPEN-END LOANS

– Bank card delinquencies fell from 3.08 percent to 2.93 percent