Consumer Delinquencies Decline in First Quarter of 2021

Consumer credit delinquencies declined in the first quarter of 2021—following a rise the prior quarter—as the economy rebounded strongly, 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) fell 48 basis points to 1.91% of all accounts. Delinquencies in credit cards issued by banks increased 40 basis points to 2.05% of all accounts in the first quarter, but remained near historically low levels.

“As expected, the federal stimulus payments last December and early this year made it easier for consumers to pay down their debt,” said ABA Chief Economist Sayee Srinivasan. “We also saw the job market improve significantly as the successful vaccination effort this spring helped lift restrictions and fuel an unprecedented economic rebound. The resulting recovery, along with strong household saving last year, means that consumers will likely remain resilient going forward.”

Delinquencies fell in two home-related categories and increased in one category in the first quarter. Among the open-ended loan types tracked, bank card delinquencies rose from 1.65% to 2.05% while non-card revolving loan delinquencies declined from 4.92% to 4.77%. Delinquencies on home equity lines of credit increased from 1.63% to 1.70%.

Srinivasan noted that he expects delinquency rates to remain low as the economy continues to improve. “With most businesses now reopened, the labor market strengthening and incomes rising, bank economists are bullish on the sustainability of the economic recovery,” he said. “The signs are pointing in the right direction for a very solid rebound through the rest of the year, which will help keep delinquency rates low for the foreseeable future.”