News & Resources

Most consumer delinquencies dropping

Dec 11, 2012 Walt Wojciechowski

The credit risk management industry has been exceptionally difficult in recent years, as businesses and consumers continue to struggle back to a state of financial stability from the lulls of the recession. Though reports continue to indicate that the economy is in an overall healthy state, risk managers need to be especially vigilant when making decisions that ensure their companies do not fall victim to dangerous agreements. With small businesses performing better and dropping the numbers of delinquent accounts back below recessionary figures over the past few months, these firms represent an opportunity for credit risk managers to take advantage. Additionally, with the holiday shopping season now in full swing, all eyes are on consumers. The widespread predictions of record-level spending worries many creditors going into the new year. Fed data optimistic
InsideARM recently reported that the latest Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks reports from the Federal Reserve for the third quarter showed improvements in nearly every segment of the consumer credit industry. According to the news provider, consumer credit card delinquencies dropped from 2.9 in the second quarter of this year to 2.83 percent last quarter, marking the best reading since 1991. The one poor point in the reports regarded mortgage delinquencies, which increased from 10.54 percent in the second quarter to 10.77 percent in the third. This is the highest number of the year, and close to the records seen following the housing crisis in 2010, boding poorly for debt collectors and risk managers alike. However, while mortgage delinquencies have risen incrementally over the past several quarters, all other consumer loans have dropped consistently since the first quarter of 2010. Now, with late payments on loans dropping to historic levels - as they are the lowest they have been since the Fed began tracking such data - debt collectors have an opportunity to seek out outstanding loans and other dues. Credit risk management a matter of foresight
Some of the better studies and research provide insights that indicate where the national economy will be several months down the road. Credit risk managers need to seek out data and look at the trends over a long stretch of time to ensure their information yields sound business decision-making among executives. If these professionals do not feel entirely comfortable with the task, they should hire a firm that does.