Consumer credit delinquencies tumble to record lows

Sayee Srinivasan

Consumer credit delinquencies dropped to record lows in 2Q 2021 as the economy continued to rebound from the pandemic, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin

The bulletin’s composite ratio tracking delinquencies in eight closed-end installment loan categories fell 69 basis points to 1.21 percent of all accounts — the lowest level recorded since ABA started tracking the data in 1993. Delinquencies in credit cards issued by banks fell 67 basis points to 1.38 percent of all accounts in 2Q 2021, also the lowest since at least 1993. 

“Consumers have remained focused on keeping credit card balances manageable and spending within their means,” said ABA Chief Economist and Head of Research Sayee Srinivasan. “Despite the extraordinary challenges posed by the pandemic, card delinquencies have remained at low levels in recent quarters.”

Delinquencies in direct auto loans fell 40 basis points to 1.45 percent of all accounts, and those in indirect auto loans (arranged through a third party such as an auto dealer) fell one basis point to 2.09 percent of all accounts, dropping below the category’s pre-Covid-19 level of 2.56 percent in 4Q 2019.  The ABA found that delinquencies had fallen in nine of 11 loan categories compared to the previous quarter.

“Consumers’ financial health generally continued to strengthen in the second quarter due to the robust jobs recovery and another round of federal stimulus payments,” Srinivasan said. “These factors helped households shore up savings and meet their financial obligations.”

September’s unemployment rate fell to 4.8 percent from 5.2 percent the previous quarter, according to the Bureau of Labor Statistics. Notable job gains occurred in hospitality and leisure, professional and business services, retail trade, and transportation and warehousing. 

However, Srinivasan said Covid-19 remains a possible hindrance in the economic recovery. As reported by the Associated Press, another increase in consumer prices last month sent inflation up 5.4 percent from one year ago, matching the largest increase in 13 years, due to global supply line tangling. 

“While the second quarter delinquency data was extremely promising, the Delta variant has added volatility to the economic outlook since then,” Srinivasan said. “Many consumers continue to struggle even as the economy finds its footing, but banks remain dedicated to helping their customers navigate their financial challenges.”