Card Limits Fall as Americans in Collections System Sets Record
March 05 2013
Aggregate credit card limits dropped during the fourth quarter ended Dec. 31 (down $9 billion or 0.3%), according to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit, while the percentage of people with at least one account under third-party collections hit a record high.
Aggregate consumer debt rose slightly in the same period, by $31 billion, a reversal from a trend in place since the fourth quarter of 2008.
An estimated 14.6% of consumers had an account with a third-party collector in the fourth quarter, up slightly from 14% in the third quarter. The previous high point occurred in the second quarter of 2011, at 14.38%.
There are 383 million open credit card accounts, a slight uptick from the third quarter.
Balances on credit card accounts increased by approximately $5 billion, the second consecutive quarterly increase.
The number of credit inquiries within six months an indicator of consumer credit demand continued to decline slightly through the end of 2012. There were 164 million inquiries, a little lower than
the 167 million seen in the third quarter.
Total consumer indebtedness as of Dec. 31 was $11.34 trillion, 0.3% higher than in the third quarter of 2012. Overall consumer debt remains considerably below its peak of $12.68 trillion in the third quarter of 2008.
Mortgages, the largest component of household debt, were roughly flat. Mortgage balances shown on consumer credit reports in the fourth quarter stand at $8.03 trillion, roughly unchanged from the level in the third quarter. Home equity lines of credit (HELOC) were the only product to see a substantive decline in the fourth quarter; balances dropped by $10 billion (1.7%) and now stand at $563 billion.
Non-housing household debt balances increased for the third consecutive quarter and now stand at 2.75 trillion, up by 1.3% in the fourth quarter. All non-housing components increased, with auto loans
up by $15 billion; student loans up by $10 billion, and credit card balances up by $5 billion.
Overall, delinquency rates continued to improve in the fourth quarter. As of Dec. 31, 8.6% of outstanding debt was in some stage of delinquency, compared with 8.9% in the second quarter last year.
About $978 billion of debt is delinquent, with $712 billion seriously delinquent (at least 90 days late or “severely derogatory”).
Delinquency transition rates for current mortgage accounts were stable through 2012, with 1.8% of current mortgage balances transitioning into delinquency in the fourth quarter. The rate of transition from early (30-60 days) into serious (90 days or more) delinquency was also roughly stable, ending the year at 26.1%. The cure rate – the share of balances that transitioned from 30-60 days delinquent to current – improved slightly in the quarter and now stands at 28.1%.
An estimated 336,000 consumers had a bankruptcy notation added to their credit reports in the fourth quarter, a 21% drop from the same quarter last year, and the eighth consecutive drop in bankruptcies on a year-over-year basis.