ABA Banking Journal
Bank card delinquencies resumed a slow return toward normal levels in the third quarter of 2018 but remain low by historical standards, according to ABA’s Consumer Credit Card Delinquency Bulletin released today. The composite ratio, which tracks delinquencies in the closed-end installment loan categories (direct and indirect auto, home equity, marine, mobile home, personal, property improvement and RV loans) rose 11 basis points to 1.87 percent of all accounts but remained below the pre-recession average of 2.09 percent.
The increased composite ratio was driven primarily by increases in auto and home equity loan delinquencies. ABA Chief Economist James Chessen noted that the results “are not surprising as the economy moderates following some very robust quarters of growth this past year.” However, “the good news is that consumers remain confident and financially healthy amid a robust job market and rising wages,” he added.
Delinquencies were down in five of the 11 categories tracked by ABA, while the other six increased. Among the open-ended loan types tracked, bank card delinquencies rose from 2.93 percent to 3.05 percent, though they remained slightly below first-quarter levels and well below the pre-recession average of 4.33 percent. Meanwhile, non-card revolving loan delinquencies ticked up slightly from 1.57 percent to 1.6 percent. Delinquencies on home equity lines of credit fell from 1.15 percent to 1.14 percent.
Chessen noted that he expects delinquency levels to continue in step with the natural economic cycle. “We expect fourth-quarter numbers will show very strong retail sales, which drives economic growth but can also lead to a financial frostbite if consumers overextend themselves. Prudent consumer spending is key to preventing delinquencies, and every indication is that consumers will continue their sound financial management practices.”