Delinquency Rates Fall in 9 of 11 Consumer Loan Categories: ABA

For the first time in nearly six years, the delinquency rates on eight closed-end loan categories tracked by the American Bankers Association all fell in the fourth quarter of 2017, compared with the same period a year earlier, while the delinquency rate on open-end loan categories increased in two of three categories tracked by the ABA, the association released yesterday.

A strong economy and robust job market were cited as the reasons for the improving delinquency rates.

“It’s rare to see delinquencies fall in nearly every category, and the levels continue to be very low by historical standards,” said James Chessen, ABA’s chief economist, in a statement. “The steady creation of new jobs has been essential to keeping delinquencies low, and we’ve seen more than 10 million jobs filled in the past four years. Greater job stability and increased take home pay have allowed consumers to make more purchases while keeping balances low relative to their income.”

The delinquency rates among closed-end loan categories all decreased by at least 5%.

  • Direct auto loan delinquencies fell from 1.12% to 1.07%
  • Indirect auto loan delinquencies fell from 1.84% to 1.78%
  • Home equity loan delinquencies fell from 2.42% to 2.28%
  • Marine loan delinquencies fell from 0.94% to 0.76%
  • Mobile home delinquencies fell from 4.97% to 4.48%
  • Personal loan delinquencies fell from 1.90% to 1.57%
  • Property improvement loan delinquencies fell from 1.08% to 1.04%
  • RV loan delinquencies fell from 0.96% to 0.73%

Among open-ended loan types, the changes in delinquency rates were:

  • Bank card delinquencies fell from 2.62% to 2.46%
  • Home equity lines of credit delinquencies rose from 1.08% to 1.16%
  • Non-card revolving loan delinquencies rose from 1.57% to 1.62%

Delinquency rates are expected to remain low for the foreseeable future, Chessen said, largely due to changes enacted this winter related to income tax.

“Tax reform has put more money in Americans’ paychecks, which makes it a little easier for them to meet their obligations each month,” Chessen said. “Consumers have done a remarkable job of managing their finances over the last several years, and we expect that will continue as the growing economy reinforces their financial footing.”

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