Closed-End Delinquencies Drop in Q2, Q3 2020

Consumer credit delinquencies declined in eight out of 11 closed-end loan categories in the second and third quarters of 2020 amid significant fiscal support and sound financial management from consumers, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin released today. The results from the two quarters were combined due to pandemic-related reporting delays in the second quarter.

The composite ratio, which tracks delinquencies in eight closed-end installment categories, fell 101 basis points in the second quarter to 1.69% of all accounts. The composite ratio increased 15 basis points to 1.84% in the third quarter, due in part to a rise in indirect auto loan delinquencies.

“We’ve seen continued improvement in delinquencies for most loan categories following the sharp increase when the pandemic first gripped our nation at the beginning of last year,” said ABA Senior Economist Rob Strand. “Consumers have remained cautious about spending amid economic uncertainty and have leveraged their stimulus payments to help ensure they meet their obligations.”

Bank card delinquencies fell 109 basis points to 1.52% of all accounts in the second quarter, declining to the lowest level on record. In the third quarter they were essentially flat. Strand added that “Consumers have done an extraordinary job of spending within their means over the past decade, and they maintained that discipline throughout the recession caused by COVID-19. Paired with consumer resilience, card issuers have provided assistance to those affected while implementing balanced underwriting standards to ensure consumers have the ability to repay.”

Among the other open-end loan types tracked, home equity lines of credit delinquencies rose 29 basis points to 1.33% in the second quarter then fell 13 basis points to 1.20% in the third quarter.