Credit-card delinquencies decline in first quarter

“The good news is that credit card delinquencies fell during the first quarter of 2007,” said ABA Chief Economist James Chessen in a news release. “The improvement in credit card late payments is somewhat remarkable, given that the economy was not operating on all cylinders.”

Chessen noted, however, that consumers’ overall financial positions were worsened by slow job growth, falling home prices and weak economic growth.

“There are still signs of consumer financial distress, which will continue throughout most of this year as the worst of the housing problem works its way through the economy,” Chessen said, referring to the sharp increase in the composite ratio, particularly for items directly related to housing.

The number of delinquent accounts in the composite ratio, which tracks eight closed-end installment loan categories, increased to 2.42 percent from 2.23 percent. This ratio moved upward for the past year, reaching levels not seen since 2001.

“The increase in the first quarter of 2007 was driven in part by double-digit increases in home-equity loan delinquencies,” Chessen said.

According to the first-quarter composite ratio:

• Home equity loan delinquencies increased to 2.15 percent from 1.92 percent;

• Property improvement loan delinquencies increased to 1.61 percent from 1.29 percent;

• Indirect auto loan delinquencies increased to 2.73 percent from 2.57 percent;

• Direct auto loan delinquencies decreased to 1.68 percent from 1.85 percent;

• Personal loan delinquencies increased to 2.08 percent from 1.91 percent;

• Recreational vehicle loan delinquencies increased to 1.03 percent from 0.96 percent; and

• Delinquencies for home equity lines of credit – the lowest delinquency rate category –increased to 0.6 percent from 0.57 percent.

“It’s important that consumers who are having trouble meeting their financial obligations contact their lender immediately,” Chessen said. “Lenders are willing to work with borrowers during periods of financial stress, but ignoring the problem only makes the situation much worse.”

The ABA also suggests that consumers be on the lookout for warning signs of being overextended on credit, including paying only the minimum on credit debt month after month and borrowing from one lender to pay another. When there is trouble, the organization suggests that borrowers communicate openly with lenders.

ABA represents 2 million people in the banking and finance industry. [[In-content Ad]]