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Consumer delinquencies declined significantly in last year’s fourth quarter, with bank-card delinquencies falling to levels not seen since the third quarter of 1994, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin.

During the fourth quarter of 2012, bank-card delinquencies fell 28 basis points to 2.47 percent of all accounts — an 18-year low and well below the 15-year average of 3.87 percent.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 17 basis points to 1.99 percent of all accounts in the fourth quarter, below the 15-year average of 2.39 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
James Chessen, ABA’s chief economist, attributed the improvement to consumers’ continued efforts build a financial buffer against economic uncertainty.

“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” Chessen said. “While this conservative approach to credit may slow economic growth in the short-term, it portends stronger, more consistent growth in the future. The sharp decline in delinquencies reinforces the notion that the economic recovery has become more self-sustaining and is on a path to increased growth.”

Chessen noted that delinquencies in all three home-related loan categories — property improvement loans, home equity loans and home equity lines of credit — fell in the fourth quarter. This is the first time all three of these categories have seen delinquencies decline since the fourth quarter of 2011.

“While home-related delinquencies remain at elevated levels, even one quarter of declines could signal the start of a slow, but steady improvement. Falling delinquencies are another indicator of the housing market’s nascent recovery.” Chessen said. However, he added, “Make no mistake about it, a great deal of uncertainty still lingers over this economy.”