Credit Card Delinquencies Climb to a 5-Year High

In the latest sign of consumers’ increasing debt burdens, credit card delinquencies hit a five-year high in last year’s fourth quarter, the American Bankers Assn. said Thursday.

Credit card accounts that were 30 days or more past due reached 3.34% in the period, the bankers trade group said. That is up just slightly from the third quarter but almost a full percentage point higher than a year earlier.

“It’s a rather substantial increase,” said Mark Zandi, an economist at Regional Financial Associates, a consulting firm in West Chester, Pa.

In a suggestion that consumer debt problems are worsening in Southern California, Gary Stroth, head of Consumer Credit Counseling for Los Angeles County, said Thursday that his staff counseled 26,783 families last year--the highest number in its 30-year history. Through the end of February, he said, the caseload is up almost 50%.

Stroth said more than a third of the clients said their debt troubles were caused by unemployment or reduced income. Another third, he said, confessed that they are just not good money managers.

“It’s a little bit of everybody,” he said.

The bankers association, which conducts a quarterly survey of banks, said the credit card delinquency figure has not been this high since the first quarter of 1991, when the country was in the throes of a recession.

“While increases in credit late payments have slowed, the level of delinquencies is still alarming,” said James Chessen, the group’s chief economist. “If consumer credit growth continues to outpace disposable income, additional problems will surface.”

The rise in the delinquency rate, which was not surprising, came with a surge of consumer borrowing in the last two years, a trend that has raised much concern among economists.

Zandi said the rise in problem credit card accounts reflects a loosening by lenders in recent years, along with weakness in the economy and the surge in interest rates last year.

The banker group report said a composite of eight types of consumer loans, including auto and home equity, shows delinquencies rose to 2.12% in the fourth quarter, up from 1.98% in the third quarter and 1.72% for the 1994 fourth quarter.

A separate report Thursday by the Mortgage Bankers Assn. of America says the delinquency rate for residential mortgages rose to 4.25% in the fourth quarter, up from 4.15% a year earlier.

Although they expressed concern about the problem loans, economists said they do not expect credit card delinquencies to get worse, because lenders have begun to shore up lending requirements.

“My impression is that most banks have indeed tightened credit standards,” said Lynn Reaser, chief economist at First Interstate Bank in Los Angeles.

Reaser said credit card delinquencies at her bank were up slightly at the end of last year over 1994 but that they were still well below the national rate.

Reaser said consumer loan delinquencies were particularly high last year in Hawaii, Massachusetts and Connecticut. California is in the low end of the spectrum, she said.

The news of growing debt problems came as the nation’s commercial banks reported profits of $48.8 billion in 1995, a fourth straight year for record industry earnings.

* NO INFLATION

Wholesale prices fell 0.2%. D2