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Volume of delinquent consumer loans plummeted in fourth quarter

Apr 10, 2012 Walt Wojciechowski

Consumer loan delinquencies fell in the fourth quarter of last year, reflecting a general uptick in fiscal stability, despite a report released this week showing a nationwide lack of financial knowledge. The American Bankers Association reported Thursday that timely repayments improved in all 11 surveyed consumer loan categories during the October-December period for the first time since 2004. Overall delinquency rates remain relatively high, in light of the slow economic recovery and heavy debt loads. However, data suggest Americans are having an easier time paying off auto loans, credit cards and other debts. "The good news is that fewer people are losing their jobs and more people are becoming re-employed," ABA's James Chessen said in a statement on Thursday. "Those two factors combined means more people are better positioned to meet their debt obligations." Delinquencies on bank-issued credit cards accounted for roughly 3.17 percent of all accounts in the fourth quarter, down from 3.25 percent in the previous period and a high of 5 percent in the second quarter of 2009. According to the Los Angeles Times, the dip in late payments reflects the writing-off of certain debts by banks and private lenders. Meanwhile, the delinquency rate for home equity loans dropped from 4.12 percent to 4.08 percent. Analysts noted that overall delinquencies figures are likely to continue to fall in coming months but not at the same level seen in the fourth quarter. The news bodes well for debt collection and alternative credit firms, as timely payments point to a lower risk environment. Such an outlook may lead to higher lending activity to consumers and businesses alike. However, Chessen noted, gasoline prices remain a chief concern, as rising costs force American to devote their finances - many of it discretionary - to filling their fuel tanks. "The more money you pull out of your pocket and put into a gas tank, the less you have for paying your debts and spending on other things," he added. Unemployment remains another concern. While the jobless rate continues to fall, dropping to 8.2 percent in the most recent report from the Department of Labor, it remains well above pre-recession averages. "The connection is obvious: When someone loses a job, it's much more difficult for them to meet their obligations," Chessen said. "If we continue to see steady growth in jobs, we'll see continued improvement."