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Delinquencies in closed-end loans rose slightly in last year’s third quarter amid slower economic growth, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.  Delinquencies ticked up in six of the 11 individual loan categories.

After falling 17 basis points in the previous quarter, the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 5 basis points to 1.41 percent of all accounts in the third quarter. This figure is 10 basis points below the third quarter 2014 composite ratio—which was a record low at the time—and remains well below the 15-year average of 2.25 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

“The economy remains positive even though its momentum slipped a little in the third quarter,” says James Chessen, ABA’s chief economist.  “Slower job and household income growth made for fewer improvements in delinquency rates.  Fortunately, consumers remained disciplined in managing their debts, which has kept delinquencies close to historical lows.”

Home-related delinquencies fell in two of three categories in the third quarter, continuing their overall downward trend.  Home equity line delinquencies fell 3 basis points to 1.31 percent of all accounts and property improvement delinquencies fell 4 basis points to 0.87 percent of all accounts.  Following a drop of 22 basis points in the second quarter, home equity loan delinquencies rose one basis point to 2.91 percent of all accounts in the third quarter.

“The steady decline in home-related delinquencies has been a bright spot as they grind their way back to pre-recession levels,” says Chessen. “We expect this trend to continue as the housing market keeps gaining strength.”

Bank card delinquencies rose slightly in the third quarter, increasing two basis points to 2.54 percent of all accounts.  They remain well below their 15-year average of 3.72 percent.

Chessen expects delinquencies to remain near historically low levels for the foreseeable future as they follow the lead of the economy.

“A good economy and lower delinquency rates go hand-in-hand, and the Fed is betting on a stronger economy in 2016,” says Chessen.  “If the economy remains solid and jobs continue to grow, we would expect delinquency levels to continue hovering near these historic lows.  As always, disciplined financial management by consumers is an essential ingredient for lower delinquencies.  Now is a great time for consumers to reflect on their holiday expenditures and resolve to reduce any excess debt in the New Year.”

The third quarter 2015 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 1.41  percent to 1.52 percent.
    •    Direct auto loan delinquencies rose from 0.72 percent to 0.74 percent.
    •    Indirect auto loan delinquencies rose from 1.45 percent to 1.51 percent.
    •    Mobile home delinquencies rose from 3.55 percent to 3.59 percent.
    •    RV loan delinquencies remained at 0.95 percent.
    •    Marine loan delinquencies remained at 1.09 percent.
    •    Property improvement loan delinquencies fell from 0.91 percent to 0.87 percent.
    •    Home equity loan delinquencies rose from 2.90 percent to 2.91 percent.

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

Open-end loans

  •    Bank card delinquencies rose from 2.52 percent to 2.54 percent.
    •    Home equity lines of credit delinquencies fell from 1.34 percent to 1.31 percent.
    •    Non-card revolving loan delinquencies fell from 1.80 percent to 1.71 percent.

Consumer tips

For borrowers having trouble paying down debts, ABA advises taking action — sooner rather than later — to solve debt problems. Proven tips are listed below.

  •  Talk with creditors – the sooner you talk to them, the more options you have;
    •    Don’t charge more purchases until your problems are solved;
    •    Avoid bankruptcy – it’s a short-term solution with long-term consequences; and
    •    Contact Consumer Credit Counseling Services at 1-800-388-2227.