Credit Delinquencies Hit Record Levels

Delinquencies on credit cards, home equity loans, personal loans and other forms of consumer credit all rose in the first quarter of 2009, as more Americans struggled to pay their bills in the face of mounting job losses and a worsening economy.

In addition, financially stressed consumers appear to be piling more debt onto credit cards as a means of bridging the gap caused by unemployment or other economic shortfalls, according to a report issued today by the American Bankers Association (ABA).

Credit card delinquencies, defined as 30 days past due, rose about a quarter percent to 4.75 percent of all accounts, according to the ABA. But balances on delinquent accounts rose even more sharply, more than a full percentage point, increasing to 6.60 percent of all outstanding balances, the highest since the ABA began tracking the data.

James Chessen, the ABA's chief economist, said the figures are the natural result of increasing unemployment in an economic downturn.

"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."

Home equity delinquecies at record level

Delinquencies on home equity loans also hit record highs, rising nearly half a percent to 3.52 percent of all accounts, while delinquencies on home equity lines of credit rose 0.43 percent of 1.89 percent of all accounts, also a record high.

Mobile home loan delinquencies also increased sharply, up nearly three-quarters of a percentage point to 3.70 percent, while personal loan delinquencies increased a similar amount, to 3.47 percent of all outstanding loans, up from 2.88 percent in the last quarter of 2008. Delinquencies on direct auto loans rose nearly a full percent, to 3.01 percent of all loans, up from 2.03 percent last quarter.

Delinquencies on some categories of loans did post decreases, notably property improvement loans, which declined more than a quarter percentage point to 1.46 percent, and marine loan delinquencies, which dropped nearly three-tenths of a percent to 2.04 percent. No explanation was given for the declines in these areas.

The rise in delinquencies was fueled by more than two million job losses in the first three months of the year, according to the ABA. Over six million Americans have lost their jobs since the recession began a year and a half ago.