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Consumer Delinquencies Decline Significantly in First Quarter

WASHINGTON – Consumer delinquencies declined significantly in this year’s first quarter, falling in 11 out of 13 loan categories as consumers more carefully manage their finances, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 29 basis points to 1.70 percent of all accounts in the first quarter, the lowest level since December 2004 and well below the 15-year average of 2.37 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

Bank card delinquencies fell 6 basis points to 2.41 percent of all accounts in the first quarter – the lowest level since June 1990 and well below the 15-year average of 3.87 percent.

James Chessen, ABA’s chief economist, attributed the falling delinquencies to a steady improvement in the economy and improving financial health for consumers.

“Sharply lower delinquency levels reflect improving consumer balance sheets, steady job creation and a continuing increase in household wealth,” Chessen said.  “Many consumers have learned the hard lessons of recession, and have redoubled their efforts to keep debt at manageable levels.”

Chessen believes that rising wealth and improving consumer confidence have played an important role in lower delinquency rates.

“Household net worth rebounded in the first quarter, rising above its pre-recession peak for the first time in over five years,” Chessen said.  “Rising home and stock prices create a wealth effect that boosts consumer confidence, which contributes to healthier finances and a greater ability to pay down debt.”

Chessen noted that delinquencies in two home-related loan categories – property improvement loans and home equity loans – fell in the first quarter, a positive sign as the housing market continues its gradual recovery.

“Positive trends in home-related delinquencies reflect a stronger economy and rebounding home prices,” Chessen said.  “While this improvement is encouraging, it will take a long time for delinquencies to work their way through the system and return to more normal levels.”

While delinquencies for home equity loans, which are closed-end loans with fixed terms and repayment schedules, fell sharply, delinquencies for home equity lines of credit moved slightly higher in the first quarter.

“An increasing number of home equity lines of credit have gone from interest only to fully amortizing,” Chessen said.  “This results in a payment shock for some borrowers who must adjust to paying down the principal, along with the interest.”

While Chessen found the broad-based decline in delinquencies encouraging, he emphasized that sustained job growth and strong consumer balance sheets are necessary for current trends to continue.

“The future pace of delinquencies depends on a steadily improving labor market and strong financial health for consumers,” Chessen said.  “This will allow consumers to more easily meet their debt obligations.”

The first quarter 2013 composite ratio is made up of the following eight closed-end loans.  All figures are seasonally adjusted based upon the number of accounts.


  • Personal loan delinquencies fell from 2.08 percent to 1.82 percent.
  • Direct auto loan delinquencies fell from 0.96 percent to 0.91 percent.
  • Indirect auto loan delinquencies fell from 1.85 percent to 1.66 percent.
  • Mobile home delinquencies rose from 3.53 percent to 3.92 percent.
  • RV loan delinquencies fell from 1.27 percent to 1.20 percent.
  • Marine loan delinquencies fell from 1.57 percent to 1.50 percent.
  • Property improvement loan delinquencies fell from 0.83 percent to 0.74 percent.
  • Home equity loan delinquencies fell from 4.03 percent to 3.72 percent.

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


  • Bank card delinquencies fell from 2.47 percent to 2.41 percent
  • Home equity lines of credit delinquencies rose from 1.85 percent to 1.91 percent.
  • Non-card revolving loan delinquencies fell from 1.31 percent to 1.19 percent.

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