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Consumer Delinquencies Show a Surprising Trend

“Delinquencies in consumer bank payments have hit a favorable trend, with credit card delinquencies in particular hitting an 18-year low in the fourth quarter of 2012, according to the American Bankers Association (ABA).

The upbeat assessment also found delinquencies, defined as a late payment that is 30 days or more overdue, in all three home-related loan categories — property improvement loans, home equity loans and home equity lines of credit — fell in the fourth quarter.

During the fourth quarter of 2012, bank card delinquencies fell 28 basis points to 2.47 percent of all accounts — an 18-year low and well below the 15-year average of 3.87 percent.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, ranging from personal loans to auto loans and property loans, fell 17 basis points to 1.99 percent of all accounts in the fourth quarter, below the 15-year average of 2.39 percent.

James Chessen, ABA’s chief economist, said the reduction in overdue bank payments by Americans shows they are building defenses against economic uncertainty.

“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” he noted.

“While this conservative approach to credit may slow economic growth in the short term, it portends stronger, more consistent growth in the future. The sharp decline in delinquencies reinforces the notion that the economic recovery has become more self-sustaining and is on a path to increased growth.”

But Chessen said potential fiscal pitfalls have not disappeared altogether for American consumers….”


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