A Consumer Loan Bad News Two-Fer

Tuesday, March 17, 2009 at 09:34 PM

Yesterday's news offered a two-fer on the "when's the recession/depression going to end" front: both major forms of consumer debt on personalty are still showing increasing rates of delinquency and default. So if you're a credit card company or an auto loan financer, don't look for the nightmare to end any time soon.

On the auto loan front, the report is that the percentage of auto loans which are 60 or more days delinquent "rose 8.9 percent in the fourth quarter of 2008, compared with the prior-year period, according to credit reporting agency TransUnion. And the numbers point to auto delinquencies shooting to their highest point in a decade by the end of the year." The overall rate of 60+ days delinquent rose to 0.86% for 2008's 4th quarter, compared to 0.79% in 2007's 4th quarter.

According to a TransUnion VP, "Since the recession began in December 2007, auto loan delinquencies have jumped 25 percent, compared with a 10 percent increase in the 2001 recession."

On the credit card front, the percent of outstanding debt that card issuers are now writing off as bad debt "rose in February to their highest level in at least 20 years." While the linked article tries to paint the results as mixed, on the basis that two of the large issuers "exceeded expectations" despite the fact that their default rate grew, the overall picture is not one of a recession/depression winding down:

  • Amex's rate was 8.70% in February, up from 8.30% in January
  • Citigroup's rate was 9.33% in February, from 6.95% in January
  • JPMorgan Chase & Co's rate was 6.35% in February, up from 5.94% in January
  • Capital One Financial Corp's rate was 8.06% in February, up from 7.82% in January
It's the latter two that the article tries to pitch as being somewhat good news.

Look for more card issuer attempts to impose penalties, fees, and surprise rate increases to fend off the growing bad debts. Look for auto loans to get ever more difficult to obtain.

And yet Lou Dobbs continues to ballyhoo his two-pronged assault on reality: (1) Depression? What depression?, and (2) the recession (not depression) is ending.