Consumer Delinquency Rates Fall To Pre-Crisis Level

by: Mark J. Perry

The Federal Reserve released data yesterday on delinquency and charge-off rates at U.S. commercial banks for the second quarter of 2011. For consumer credit cards, the delinquency rate fell for the 8th consecutive quarter to 3.62% during the April-June period this year, dropping to the lowest level since a 3.54% reading in the fourth quarter of 2005, more than five years ago (see blue line in chart below). And before that cyclical low, you have to go all the way back to the first quarter of 1995 to find a lower credit card delinquency rate of 3.46%. Compared with the 4.6% quarterly average since 1991, the delinquency rate on credit cards is now about a full percentage point below the long-run average.

(Click chart to expand)

For all consumer loans, the second quarter delinquency dropped to 3.28%, the lowest rate since 3.2% in the third quarter of 2007 before the recession started (see red line in chart). The second quarter delinquency rate is also below the 3.5% historical quarterly average.

The fact that consumer loan delinquency rates are back to pre-recession levels is part of the ongoing deleveraging of American households, who are also saving now at mid-1990s levels (see post here). It's also more evidence that the worst is behind us. Now if we could just get the Beltway elite to show some of the same financial responsibility that American households have been demonstrating of late.

Scott Grannis reported on this yesterday.