Yahoo Finance American debt delinquency hits 40-year low
Fears have been rising about banks loosening their credit card standards. According to a survey of senior loan officers by the Federal Reserve, “a few large banks had eased standards, increased credit limits, and reduced the minimum required credit score for credit card loans.” A rapid growth in auto lending has also prompted the Consumer Financial Protection Bureau to investigate and oversee lenders.
With all of this loan anxiety, it’s surprising to hear that Americans are actually paying off their loans in record numbers. According to a report by the American Bankers Association, installment loan delinquencies are at lows and all home-related delinquencies have fallen. A delinquency is defined as a late payment that is 30 or more days overdue. Across the board, Americans are getting better at getting out of debt. Total debt delinquency, according to the ABA, is at a 40 year low.
The economy is recovering and unemployment is decreasing but wages still remain stagnant and median household income in 2013 was 8% lower than it was in 2007. “Certainly the economy is not moving forward as fast as we wanted, but the fact that consumers are doing a better job of managing their debt shows that there really has been a conscious effort since the financial crisis to manage debt,” says James Chessen, Chief Economist of the ABA. “I think that’s a very good sign for what will happen in the future.”
Credit delinquencies have been in a downward trend for years, says Chessen, which shows a conscious choice by consumers to de-lever. “There were lessons learned about having too much when there’s a financial crisis…so I’m hopeful that those lessons will continue and consumers will be better able to manage their debt.”
As for loose lending, Chessen believes that the economy expanding and the risks associated with lending are going down because of it. People who might not have been credit-worthy three years ago are now credit-worthy, he explains.
