Credit Card Delinquencies at a New High Wed Mar 26, 6:31 PM ET Add Business - Reuters to My Yahoo! By Mark Felsenthal WASHINGTON (Reuters) - Mounting U.S. job losses pushed up credit card delinquencies in the fourth quarter of 2002 to the highest level since the American Bankers Association began tracking the data in 1990, the group said on Wednesday. Related Quotes DJIA NASDAQ ^SPC 8229.88 1387.45 869.95 0.00 0.00 0.00 delayed 20 mins - disclaimer Quote Data provided by Reuters Tax season to-do list: 1. Sharpen pencils. 2. Mark calendar. 3. Panic. Tax Season Coverage from Yahoo! News Credit card delinquencies climbed to 4.07 percent of all accounts in the quarter, up from 4 percent in the third quarter of 2002, which was the previous high, the American Bankers Association said in a statement. "The rise in delinquencies is not surprising given the cumulative weight of layoffs and the poor prospect for reemployment in the face of anemic job growth," said James Chessen, chief economist for the ABA. Analysts said the bump in late payments reflects loans to a broader pool of borrowers rather than wider troubles with U.S. consumer credit. "Banks have now made credit available to a larger number of people at the low end of the income scale, so it's not a big shock that when the economy slows down and unemployment is high that these people get into trouble," said Douglas Lee, president of Economics from Washington. TOUGH TIMES There is little evidence that consumers, who have continued to spend in spite of the sluggish U.S. economy, will stop shopping, said William Dickens, a fellow at the Brookings Institution in Washington. Nor do banks or credit card companies appear to be reacting to defaults by limiting the risks they are willing to take on, he said. "If we were seeing unprecedentedly high levels of default, that would suggest to me that we had gotten to the point where consumption was unsustainable, but the numbers don't suggest that," Dickens said. Consumers tend to rely on savings and credit cards to get through financially tough times, and the final quarter of 2002 was such a period, the ABA's Chessen said. A composite index of consumer loans including auto and home equity loans rose to 2.16 percent of all accounts from 2.06 percent in the third quarter, the ABA said. Delinquencies on home equity loans rose to 1.64 percent. Rising consumer debt delinquencies add to signs that the U.S. economic recession of 2001 and its uncertain recovery have strained the finances of many Americans. Bankruptcies were at a record level last year. Mortgages in foreclosure also reached a record high in the last quarter of 2002, although mortgage bankers say the data shows the number of people unable to meet home loan payments may have peaked. AGGRESSIVE MARKETING Consumer advocates said lenders bear some of the blame for rising levels of late payments because of their aggressive marketing to consumers. "Among those who are overextended, at least some were offered credit that clearly wasn't sustainable," said Travis Plunkett, legislative director for the Consumer Federation of America. The increase in credit card delinquencies is also linked to a lack of new jobs in the U.S. economy, ABA's Chessen said. "A turnaround will come as uncertainty disappears and businesses once again increase production and hire workers," he said. The Federal Reserve (news - web sites) said last week that recent U.S. labor market indicators were disappointing. The number of nonfarm jobs in February sank by an unexpectedly large amount and weekly figures for jobless claims have remained high.
