Consumer Delinquencies Mixed in Fourth Quarter of 2018

Consumer credit delinquencies were mixed in the fourth quarter of 2018, with the composite index of closed-end loans falling and certain open-end loan categories rising, according to ABA’s Consumer Credit Delinquency Bulletin released today. The composite ratio, which tracks delinquencies in eight closed-end installment loan categories (direct and indirect auto, home equity, marine, mobile home, personal, property improvement and RV loans) fell nine basis points to 1.78 percent of all accounts, well below the pre-recession average of 2.09 percent.

“The delinquency trends we’re seeing are typical of what happens at this stage in the business cycle, particularly as it relates to auto and credit card delinquencies,” said ABA Chief Economist James Chessen. “Consumers’ financial health overall remains solid, supported by a strong job market and continued wage growth.”

Delinquencies fell in six of the 11 categories tracked by ABA, while the other five increased. Among the open-ended loan types tracked, bank card delinquencies rose from 3.05 percent to 3.22 percent, remaining well below the pre-recession average of 4.33 percent. Meanwhile, non-card revolving loan delinquencies ticked up from 1.6 percent to 1.7 percent. Delinquencies on home equity lines of credit fell from 1.14 percent to 1.09 percent.

Chessen noted that he expects delinquency levels to trend toward normal levels as the economy slowly moderates. “Banks remain vigilant in their underwriting approach,” he said. “The Fed has put further rate increases on hold unless there are clear signs of inflation, and that in part recognizes the tightening of credit across some key markets. Consumers remain on strong financial footing, and continuing their strong track record of spending within their means is the best approach to meeting all of their obligations.”