ABA Report: Delinquencies Improved in Second and Third Quarters of 2020

ABA Report: Delinquencies Improved in Second and Third Quarters of 2020

January 22, 2021 Off By administrator

Consumer credit delinquencies fell significantly in the second quarter of 2020 before holding steady in the third quarter amid significant fiscal support and sound financial management from consumers, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Overall, delinquencies fell in 8 of the 11 loan categories tracked by ABA during both the second and third quarters of 2020. The results from the two quarters were combined in this Bulletin because of pandemic-related reporting delays in the second quarter.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 101 basis points in the second quarter to 1.69% of all accounts. The composite ratio increased 15 basis points to 1.84% in the third quarter, driven by a rise in indirect auto loan delinquencies. The third quarter number remains 30 basis points below the composite ratio’s pre-COVID level of 2.14% in the fourth quarter of 2019 (See Historical Data). The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

“We’ve seen continued improvement in delinquencies for most loan categories following the sharp increase when the pandemic first gripped our nation at the beginning of last year,” said ABA Senior Economist Rob Strand. “Consumers have remained cautious about spending amid economic uncertainty and have leveraged their stimulus payments to help ensure they meet their obligations.”

Delinquencies in bank cards fell 109 basis points to 1.52% of all accounts in the second quarter, the lowest level in history. They were essentially flat in the third quarter, rising one basis point to 1.53% of all accounts.

“Consumers have done an extraordinary job of spending within their means over the past decade, and they maintained that discipline throughout the recession caused by COVID-19,” Strand said. “Paired with consumer resilience, card issuers have provided assistance to those affected while implementing balanced underwriting standards to ensure consumers have the ability to repay.” (See Economic Charts)

Delinquencies in two of the three home-related categories rose in the second quarter of 2020, before falling in two categories in the third quarter. Home equity line of credit delinquencies rose 29 basis points to 1.33% of all accounts in the second quarter, and then fell 13 basis points to 1.20% in the third quarter. Home equity loan delinquencies rose 58 basis points to 4.16% of all accounts in Q2 before ticking up 1 basis point to 4.17% in the third quarter. Property improvement loan delinquencies fell 38 basis points to 1.26% of all accounts in last year’s second quarter, and then fell 16 basis points to 1.10% in the third quarter.

Delinquencies in direct auto loans (those arranged directly through a bank) fell 32 basis points to 1.70% of all accounts in Q2 before dipping an additional 2 basis points to 1.68% in the third quarter. Delinquencies in indirect…

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