New Report Finds Consumers Are Increasingly Falling Behind in Loan Payments

A Lack of New Jobs and the Rising Price of Commodities Are Cited as Major Factors

by Michael Reubelt on December 23, 2011

A report released by the American Bankers Association has found that in the second quarter of the business year, American consumers became more frequently delinquent on their loans. Out of a total of 11 loan categories, delinquency rates rose in 9.

The ABA’s chief economist James Chessen released a statement about the reasons for the rise, saying, “Lackluster job creation, private sector uncertainty and public sector job cuts have stalled momentum and increased pressure on consumers as the economy struggles to find a way forward.”

The biggest jumps in the loan categories, like home-equity and personal loans, rose by as much as a few tenths of a percent. While that may not seem like a huge amount, when considering the millions of loans out there, a tenth of a percent can mean tens of thousands of people if not more.

A piece of good news may arrive with the passage of any new jobs plan, should it work. With more jobs available and more incentives to businesses to raise rages, loan delinquencies may drop. However, jobs may not be the only thing causing the loan problems.

According to Chessen, “A significant increase in gasoline and food prices since the beginning of the year has further stretched family budgets, squeezing consumers and making it difficult for some people to make loan payments. Real estate prices continue to fall, and home loans face increased pressure as unemployment continues to take its toll on borrowers.”

While the report covers statistics in the second quarter, as of October 6^th it is the first quarter of the 2012 business calendar, Chessen does not have a bright outlook for the subsequent reports, “It’s hard to envision significant improvements in delinquency rates this year given the sluggish economy and falling consumer sentiment. On the positive side, bank card delinquencies have shown encouraging trends as consumers work to reduce their debt obligations and build a better financial base.”

The recent announcement of new fees on many previously free features in bank accounts may not help the small recovery Chessen expects, however, as using a debit card at Bank of America, for example, will cost $5 per month. As many people move into credit card usage in order to avoid this type of fee, the amount of credit card debt is likely to rise.

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