Consumer Delinquencies Rise in Fourth Quarter of 2020

Consumer credit delinquencies rose in the fourth quarter of 2020, following two consecutive quarters of declines, as the pandemic-induced recession weighed on the economy, 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) rose 55 basis points to 2.39% of all accounts. Delinquencies in credit cards issued by banks remained near all-time low levels, but increased 12 basis points to 1.65% of all accounts in the fourth quarter.

“Delinquencies rose late last year as high COVID-19 infection rates and elevated unemployment levels wore on many consumers who had already used the first round of stimulus payments to pay down existing debt,” said ABA Senior Economist Rob Strand. “Many of those consumers have received additional support since then. The stimulus payments in December and the even larger payments consumers received this spring will go a long way toward helping people meet their debt obligations, and both the job market and broader economy continue to improve.”

Delinquencies rose in all 11 categories tracked by ABA. Among the open-ended loan types tracked, bank card delinquencies rose from 1.53% to 1.65%. Meanwhile, non-card revolving loan delinquencies jumped from 0.49% to 4.92%. Delinquencies on home equity lines of credit increased from 1.20% to 1.63%.

Strand noted that he expects delinquency levels to return to lower levels as the economy improves. “As the unemployment rate trends downward and more people get vaccinated, the economy will continue picking up steam,” he said. “We expect delinquencies to return to lower levels as the recovery gains ground and household incomes stabilize. Bank economists are optimistic about the outlook for consumer credit quality and availability in the months ahead, which bodes well for delinquencies.”