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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Apr 3, 2013

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The American Bankers Association (ABA) announced that consumer delinquencies on personal loan debt, as well as other financing, had significantly declined in the fourth quarter of 2012.

Delinquencies for bank cards massively declined as well, reaching levels not seen since 1994.

According to the press release, the ABA considers a delinquency to be a late payment on debt that is at least 30 days overdue.

The ABA’s findings showed that personal loan delinquencies fell from 2.14 percent to 2.08 percent, indirect auto loan delinquencies fell from 2.08 percent to 1.85 percent and home equity loan delinquencies fell from 4.20 percent to 4.03 percent.

Other types of debt saw delinquency decreases, increases and lack of change.

Keith Leggett, Senior Economist at ABA, told about the causes of the delinquency rate decline.

“The decline in the delinquency rates on consumer loans cannot be attributed to any single factor; but rather a combination of factors,” he said. “Consumers are more cautious about their use of credit, banks tightened their lending standards, the economy has gradually improved, and household net worth has rebounded from its early 2009 lows.”

Leggett said that the job market’s improvement allowed people to become employed and meet their financial obligations.

Despite the ongoing economic recovery, Leggett elaborated on how lending remained strictly controlled.

“During and after the recession, banks tightened their underwriting standards,” he said. “However, starting in the middle of 2010, a small fraction of banks reported some easing of lending standards on credit cards and other consumer loans.”

While Leggett said he was unable to predict whether consumer delinquency rates will continue to decline in 2013, he did comment on the ability of consumers and borrowers to repay amid a slow economy and recent tax changes.

“Consumers have seen a reduction in their real disposable income from the increase in the payroll taxes,” said Leggett. “Businesses may be hesitant to expand and hire additional workers due to higher healthcare cost and greater regulatory burdens.”