By JEANNINE AVERSA
AP Economics Writer
WASHINGTON (AP) - Late payments on credit card bills dipped in
the second quarter, while delinquencies on home equity lines of
credit climbed to a 5½-year high, painting a mixed picture of how
people are managing their debt.
The American Bankers Association, in its quarterly survey of
consumer loans, reported Wednesday that late payments on credit
card bills dropped to 4.39 percent in the April-to-June quarter.
That was down from 4.41 percent in the first quarter and was the
lowest reading since the final quarter of 2005.
The improvement, however, came before a credit crunch took a
turn for the worse in August. Problems with "subprime" mortgages
- made to people with spotty credit or low incomes - have rocked
Wall Street in recent months.
Still, James Chessen, the association's chief economist, was
heartened by the survey's overall results. "Consumers fared
reasonably well in the second quarter despite turmoil in the
subprime mortgage market," he said.
A still-sturdy employment climate and wage growth during the
April-to-June quarter helped to cushion people from the ill effects
of a deepening housing slump. Those positive forces have "helped
to limit spillover to other consumer loans," Chessen said.
In August, however, the economy lost jobs for the first time in
four years. Although economists are hoping for a jobs rebound, any
continued weakness could put a strain on some people's ability to
pay their bills on time.
Payments are considered delinquent if they are 30 or more days
past due. The survey is based on information supplied by more than
The survey also showed that the delinquency rate on a composite
of other type of consumer loans, including those for autos and
boats, home improvement and for certain home equity loans,
decreased to 2.27 percent in the second quarter, from 2.42 percent
in the first quarter.
Late payments on home equity lines of credit, however, jumped to
0.77 percent. That was up from 0.60 percent in the first quarter
and was the highest reading since the final quarter of 2001.
The Federal Reserve's decision last week to slice a key interest
rate for the first time in four years should provide borrowers with
It will become less expensive for people to finance certain
credit card debt and for homeowners to take out popular home equity
lines of credit, which often are used to pay for education, home
improvements or medical bills.
Fallout from the housing slump has been painful. Home
foreclosures in the second quarter hit a new high and delinquencies
soared, according to a separate survey released by the Mortgage
Bankers Association earlier this month. A combination of higher
interest rates and weaker home values clobbered both borrowers and
The worst payment shock is hitting people who took out
adjustable-rate mortgages with initially low "teaser" rates that
"reset" to much higher rates over the life of the loan.
People "may feel helpless when faced with a mortgage reset they
can't afford but they still want to keep up with other payments,"
Chessen said, explaining why late payments are down for credit
cards but are up mortgages. "People need to pay for gas and their
cars so that they can get to work."
On the Net:
The American Bankers Association: http://www.aba.com
(Copyright 2007 by The Associated Press. All Rights Reserved.)