Consumer Delinquencies Rise in Q4 Ahead of Coronavirus

Consumer delinquencies rose in the fourth quarter of 2019, mostly due to increases in auto and home-related delinquencies, according to the American Bankers Association’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) rose to 2.14% of all accounts, slightly above the pre-recession average of 2.09%.

Delinquencies were up in eight of the 11 categories tracked by ABA, while falling in three. Direct auto loan delinquencies edged up to 1.19% from 1.15% the previous quarter, while indirect auto loan delinquencies rose from 2.43% to 2.56. Among the open-ended loan types tracked, home equity lines of credit delinquencies also rose from 1.07% to 1.12%, while non-revolving loan delinquencies fell. Bank card delinquencies rose 15 basis points to 3.11% of all accounts but remained well below the pre-2008-09 recession average of 4.33%.

“Credit card delinquencies remain near their lowest levels as consumers work to keep their financial obligations low relative to disposable income,” said ABA Senior Economist Rob Strand. “At the same time, lenders have maintained strong underwriting standards. In response to the coronavirus pandemic, many card issuers are supporting their customers by offering flexible bill payments as well as waiving late fees and interest.”

Strand added that the coronavirus pandemic could affect the trajectory of delinquencies in the months ahead. “COVID-19 has changed the economic outlook, and we’ll be tracking its impact over the next several quarters,” he said. “While individual circumstances will vary significantly, consumers were generally well positioned with historically low debt levels prior to the emergence of the pandemic. Our hope is that the economic disruption will be temporary, and that we’ll settle back into a normal pattern once the health crisis has passed.”