Bank card delinquencies drop significantly in second quarter 2010

Closed-end consumer loan delinquencies stay nearly flat as economy loses steam

WASHINGTON (Oct. 4) – Consumer loan delinquencies generally improved in the second quarter of 2010, as bank card, home equity loans, and auto loans all showed improvement according to the American Bankers Association's Consumer Credit Delinquency Bulletin. The results were not as broadbased as the previous two quarters and, as a result, the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, was virtually flat, rising just 2 basis points from the first quarter to 3.00 percent of all accounts in the second quarter.

Bank card delinquencies fell 26 basis points to 3.62 percent of all accounts which remains well below the 15-year average (3.93 percent). This is the lowest that bank card delinquencies have fallen since the first quarter of 2001. (See Historical Fact Sheet.) The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

ABA Chief Economist James Chessen said part of the reason bank card delinquencies have been falling is because banks continue to write off loans that have not been repaid, but also because consumers are being prudent with their spending.

“Consumers continue to focus on reducing debt levels, using credit cards less, and building savings,” Chessen said. “This is very positive, but the fundamental story is the same: it's all about jobs. When people don't have jobs, they can't pay their bills. High numbers of unemployed workers and slow job growth continue to paint a picture of financial stress for many households,” he added. (See economic charts.)

Loan categories showing increased signs of stress include mobile home loans and marine loans. Mobile home loan delinquencies rose 36 basis points from the previous quarter to 4.01 percent, the highest rate since October 2005. Marine loan delinquencies rose 27 basis points from the previous quarter to 2.20 percent.

“The economic momentum over the last few quarters seems to be losing steam. This will affect job creation and the ability of consumers to pay off debt,” Chessen said. “I think delinquencies will continue to improve but at a slower pace, reflecting a struggling economy.”

The second quarter 2010 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.


Decreased Delinquencies:

• Direct auto loan delinquencies fell from 1.79 percent to 1.67 percent.

• Indirect auto loan delinquencies fell from 3.03 percent to 3.01 percent.

• Home equity loan delinquencies fell from 4.12 percent to 3.97 percent.

• Personal loan delinquencies fell from 3.61 percent to 3.55 percent.

• Property improvement loan delinquencies fell from 1.40 percent to 1.35 percent.

Increased Delinquencies:

• Marine loan delinquencies rose from 1.93 percent to 2.20 percent.

• Mobile home loan delinquencies rose from 3.65 percent to 4.01 percent.

• RV loan delinquencies rose from 1.58 percent to 1.63 percent.

In addition, ABA tracks three open-end loan categories:


Unchanged Delinquencies:

• Home equity lines of credit delinquencies were unchanged at 1.81 percent.

Decreased Delinquencies:

• Bank card delinquencies fell from 3.88 percent to 3.62 percent.

• Non-card revolving loan delinquencies fell from 1.63 percent to 1.21 percent.

For borrowers having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems with the following tips:

• Talk with creditors – the sooner you talk to them, the more options you have;

• Don't charge more purchases until your problems are solved;

• Avoid bankruptcy – it's a short-term solution with long-term consequences; and

• Contact Consumer Credit Counseling Services at 1-800-388-2227.

For more information on budgeting, saving and managing credit, visit the ABA Education Foundation's consumer web page at


Indirect auto loan: loan arranged through a third party such as an auto dealer.

Direct auto loan: loan arranged directly through a bank.

Delinquency: late payment that is 30 days or more overdue.

Bank card: a credit card provided by a bank.

Closed-end loan: a loan for a fixed amount of money with a fixed repayment period and regularly scheduled payments.

Open-end loan: a loan with a fixed amount of available credit but a balance that fluctuates depending on usage such as a line of credit.

The American Bankers Association represents banks of all sizes and charters and is the voice for the nation's $13 trillion banking industry and its two million employees. Learn more at