Even though Americans continue to endure a challenging economic climate, they're doing a better job of paying their bills. The American Bankers Association reports that delinquencies have declined among most consumer loans. The trend is clear.
Here's a snapshot:
- Direct auto loan delinquencies fell from 1.94 percent to 1.79 percent.
- Indirect auto loan delinquencies fell from 3.15 percent to 3.03 percent.
- Home equity loan delinquencies fell from 4.32 percent to 4.12 percent.
- Personal loan delinquencies fell from 3.63 percent 3.61 percent.
- Property improvement loan delinquencies fell from 1.63 percent to 1.40 percent.
- Home equity lines of credit delinquencies fell from 2.04 percent to 1.81 percent.
- Bank card delinquencies fell from 4.39 percent to 3.88 percent.
The only loans where delinquencies are up a little include those for boats, mobile homes, RVs, and non-revolving credit cards. But all that is vastly overshadowed by positive results for other consumer debt products shown above.
According to the ABA, the 3.88% bank card delinquency rate marks the first fall below 4% since 2002. In other words, bank card delinquencies aren't just the fewest they've been since the recession began, but at a low not seen in nearly eight years.
So what's going on here? According to ABA Chief Economist James Chessen:
"It's clear that consumer balance sheets are improving. People are borrowing less, saving more and building wealth."
This is generally supported by the decline in consumer credit balances we've seen pretty consistently reported by the Federal Reserve over the past several months. But this vastly improved delinquency data might say something even stronger. In the face of extraordinary economic turmoil, Americans have become more fiscally responsible. This isn't just about paying down debt; it's about paying more bills in a timely manner.
The most surprising bullet above is the drop in home equity loans. Some analysts have considered these hopeless due to the mortgage market's problems. But not only are people still paying these loans, but they're doing so more consistently than in the past. The same goes for home equity lines of credit.
What makes these statistics even more impressive is the fact that unemployment is near 10%. Delinquencies are falling despite an incredibly high number of jobless Americans. As these people find jobs, delinquencies should fall even further. That is, unless economic prosperity causes Americans to abandon their newfound fiscal responsibility and desire to save.