Late Payments on Consumer Loans Highest Since 1992

Late Payments on Consumer Loans Highest Since 1992

 

As reported in Bloomberg

 

April 3 (Bloomberg) — Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years during the fourth quarter, another sign the U.S. economy is slowing, according to an American Bankers Association survey.

 

Payments at least 30 days past due increased across all eight categories of loans tracked, the Washington-based group said today in a statement. Late loans climbed 21 basis points to 2.65 percent of all accounts in a consumer-loan index created by the group.

 

“The rise in consumer credit delinquencies is consistent with a rapidly slowing economy,” ABA chief economist James Chessen said in the statement. “Stress in the housing market still dominates the story, but it’s a broader tale.”

 

Lenders including American Express Co., the third-biggest credit-card network, and Capital One Financial Corp. doubled reserves for soured U.S. debt in the fourth quarter. Overdue bank-card accounts reached 4.38 percent in the quarter, according to the ABA, as the slowing economy made it harder for consumers to repay debt.

 

The overall increase was driven by late payments for car loans, which make up two-thirds of all closed-end consumer installment loans, Chessen said. Auto loan delinquencies rose to 1.9 percent from 1.81 percent. Overdue mobile home payments rose to 2.92 percent from 2.87 percent.

 

Federal Reserve Chairman Ben S. Bernanke acknowledged for the first time yesterday that a U.S. recession is possible because consumer spending, employment and homebuilding will deteriorate this year.

 

Rising late payments will continue in the first half of this year, as “food and gas prices remain stubbornly high and income growth is anemic,” Chessen said.

 

Our Perspective

 

Many of us have seen this coming. Prices keep rising and business and consumers are feeling the pinch.

 

Being late on a payment just adds more pressure.

 

Credit card companies have a default clauses that normally jack up your rate. You get your next statement in the mail and you find out you are now paying 30%.

 

Somehow that does not seem fair. When you need the help most, they only tighten the screws.

 

This all did not happen overnight and it will take some time to correct itself.

 

What do we do in the mean time?

 

If you are a business owner, this is a good time to be proactive.

 

Review your cost. There are many opportunities for savings.

 

Saving money does not equate with lessening your ability to service your clients.

 

It will actually make you more competitve and increase your abilty to compete in our evolving market.

 

Let us know your thoughts?

 

Do you have a question?

 

You may email george@hbsadvantage.com

 

Hutchinson Business Solutions ……Your CFO on the Go. 

Creating Opportunities Today,…Defining Savings for Tomorrow.

Visit http://www.hutchinsonbusinesssolutions.com/ to learn more about saving opportunities available for your company. 

Spread the good news….. share this information with a friend.