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Overdue Consumer Debts Highest Since 1992, ABA Says (Update1)
By Hugh Son
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.
``It's an indication of the degree of stress consumers are facing
right now,'' said Nigel Gault, director of U.S. research at
Lexington, Massachusetts-based Global Insight Inc. ``People
overextended themselves, they took out loans they thought weren't a
problem as long as house prices kept rising.''
Lenders including American Express Co., the third-biggest credit-card
network, and Capital One Financial Corp. doubled reserves for soured
debt in the fourth quarter amid the worst housing slump in a quarter
century. 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 consumer loans with fixed balances, ABA
chief economist James Chessen said in the statement. 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.
`A Broader Tale'
``The rise in consumer credit delinquencies is consistent with a
rapidly slowing economy,'' Chessen said. ``Stress in the housing
market still dominates the story, but it's a broader tale.''
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.
The U.S. economy grew at an annual pace of 0.6 percent from October
to December. Growth probably slowed to a 0.2 percent annual rate in
the first quarter, according to the median estimate of analysts
surveyed by Bloomberg News.
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.
MasterCard Inc. Chief Executive Officer Robert Selander said in a
March 11 interview that U.S. consumers are spending more on gasoline
and food, crimping spending for luxury items. MasterCard is the
second-biggest payment-card network after Visa Inc.
``What we see is a mix change in how consumers are spending,''
Selander said in the Bloomberg Radio interview. ``With the price of
gasoline up approximately 30 percent from where it was a year ago,
with commodities prices up and working their way into prices at the
supermarkets, consumers are spending more of their money now on gas
and groceries.''
By Hugh Son
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.
``It's an indication of the degree of stress consumers are facing
right now,'' said Nigel Gault, director of U.S. research at
Lexington, Massachusetts-based Global Insight Inc. ``People
overextended themselves, they took out loans they thought weren't a
problem as long as house prices kept rising.''
Lenders including American Express Co., the third-biggest credit-card
network, and Capital One Financial Corp. doubled reserves for soured
debt in the fourth quarter amid the worst housing slump in a quarter
century. 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 consumer loans with fixed balances, ABA
chief economist James Chessen said in the statement. 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.
`A Broader Tale'
``The rise in consumer credit delinquencies is consistent with a
rapidly slowing economy,'' Chessen said. ``Stress in the housing
market still dominates the story, but it's a broader tale.''
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.
The U.S. economy grew at an annual pace of 0.6 percent from October
to December. Growth probably slowed to a 0.2 percent annual rate in
the first quarter, according to the median estimate of analysts
surveyed by Bloomberg News.
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.
MasterCard Inc. Chief Executive Officer Robert Selander said in a
March 11 interview that U.S. consumers are spending more on gasoline
and food, crimping spending for luxury items. MasterCard is the
second-biggest payment-card network after Visa Inc.
``What we see is a mix change in how consumers are spending,''
Selander said in the Bloomberg Radio interview. ``With the price of
gasoline up approximately 30 percent from where it was a year ago,
with commodities prices up and working their way into prices at the
supermarkets, consumers are spending more of their money now on gas
and groceries.''
