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Delinquent consumer loans rise to near record
Auto loans and home-equity loans showed notable increases, while late payments on credit cards decreased.
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Americans fell behind on their consumer loan payments in record numbers last fall, more than in almost 30 years of tracking by the American Bankers Association, the industry group said Wednesday.
Delinquencies in eight kinds of installment loans rose to a seasonally adjusted 2.9 percent in the third quarter of 2008, breaking the previous record of 2.88 percent in the third quarter of 1989. Any payment more than 30 days overdue is considered delinquent.
The banking group, based in Washington, D.C., created its delinquency index in 1980.
The latest figure includes new delinquency records for two kinds of loans, reflecting continued financial distress by the nation's bill payers, the group said. Delinquencies for indirect auto loans -- through third parties such as auto dealers (about 90 percent of its members' total) -- reached 3.25 percent, topping the record of 3.13 percent set in the last quarter of 2007. Delinquent home equity lines of credit hit 1.15 percent, surpassing the record 1.1 percent in the first quarter of last year.
Other loans included in the bankers' report are credit card, boat, mobile home, RV and personal loans.
The group's chief economist, James Chessen, blamed nationwide unemployment for most of the delinquencies. "With 1 million jobs lost in the first three quarters, and 2 1/2 million expected for the year ... the No. 1 factor in rising consumer credit delinquencies is job losses," Chessen said.
Minnesota financial counselors see a constellation of forces at work. Some people overspend, living beyond their means, said Darryl Dahlheimer at Lutheran Social Service of Minnesota in Minneapolis. Some consumers with adjustable-rate mortgages get hit by bigger payments. Some lose a job or find their work hours cut. And all the while, they must cope with rising food and energy prices and property taxes, Dahlheimer said.
"What we see are people in 'deeper delinquency,' with the same amount of debt but two or three months behind instead of one," he said.
A national consumer analyst saw a glimmer of improvement in auto loan payment rates. Delinquencies were flat from the third to the fourth quarters of last year, and they even started coming down in late November and December, said Art Spinella at CNW Marketing Research Inc., Brandon, Ore.
"Voluntary repos," when people walk away from auto loans, also were way down in December after about 20-year highs last summer, said Spinella, who tracks credit unions and other finance companies as well as banks.
Credit cards is one category where delinquencies decreased -- down 0.34 percentage points to 4.20 percent from the second to the third quarter.
A spokeswoman for the bankers' association speculated that people want to protect their cards, which they need to cover essential expenses.
"Also, if you're squeezed one month, you have the option to make only the minimum payment," Kaplan said.
H.J. Cummins • 612-673-4671
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