Consumer delinquincies rise again

July 8, 8:18 AMNY Consumer Affairs ExaminerAsa Aarons

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More Americans are out of work...and--no surprise--more of them are having a hard time paying their bills. In a just released report about the first quarter of 2009, the American Bankers Association linked the record wave of job losses to a record rate of consumer delinquencies.

More than two million Americans lost their jobs in the first three months of the year with more than 6 million jobs lost since the recession began.  The composite ratio, which tracks delinquencies in eight  installment loan categories, rose to 3.23 percent of all accounts. The ABA report defines a delinquency as a late payment that is 30 days or more overdue. 

ABA Chief Economist James Chessen said the figures are a natural consequence of mounting job losses in a weakening economy. “The number one driver of delinquencies is job loss,” Chessen said.  “When people lose their jobs, they can’t pay their bills.  Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround,” Chessen said, adding that job growth is not likely to improve in the foreseeable future.  “However, many people are taking greater control of their finances by cutting spending, lowering debt and saving more money.”

Chessen said the unemployed may be using bank cards to bridge a temporary income gap, especially with less home equity to fall back on as housing prices continue to fall.  “Even if home prices stop falling later this year, unemployment will keep home equity delinquencies high for some time,” Chessen said.

The first quarter composite ratio is made up of the following closed-end loans.  All figures are seasonally adjusted based upon the number of accounts:

• Home equity loan delinquencies increased from 3.03 percent to 3.52 percent.
• Property improvement loan delinquencies decreased from 1.75 percent to 1.46 percent.
• Indirect auto loan delinquencies decreased from 3.53 percent to 3.42 percent.
• Direct auto loan delinquencies increased from 2.03 percent to 3.01 percent.
• Marine loan delinquencies decreased from 2.35 percent to 2.04 percent.
• RV loan delinquencies increased from 1.38 percent to 1.52 percent.
• Mobile home loan delinquencies increased from 2.96 percent to 3.70 percent.
• Personal loan delinquencies increased from 2.88 percent to 3.47 percent.

For homeowners having trouble paying their mortgage, ABA strongly recommends they consult www.hopenow.com or call 1-888-995-HOPE.  HOPE NOW is a cooperative effort between counselors, investors, and lenders to help homeowners in distress.

For others who are having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems with the following tips:

• Talk with creditors – the sooner you talk to them, the more options you have;
• Don’t charge more purchases until your problems are solved;
• Avoid bankruptcy – it’s a short-term solution with long-term consequences; and
• Contact Consumer Credit Counseling Services at 1-800-388-2227.