Overdue Consumer Debts Highest Since 1992, ABA Says

Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years, another sign the U.S. economy is slowing, according to the American Bankers Association's quarterly survey.

Payments at least 30 days past due increased across all eight categories of loans tracked during the fourth quarter, the Washington-based group said today in a statement. Late loans in the quarter climbed 21 basis points to 2.65 percent of all accounts in a consumer-loan index created by the group.

``It's an indication of the degree of stress consumers are facing right now,'' said Nigel Gault, director of U.S. research at Lexington, Massachusetts-based Global Insight Inc. ``People overextended themselves, they took out loans they thought weren't a problem as long as house prices kept rising.''

Lenders including American Express Co., the third-biggest credit-card network, and Capital One Financial Corp. doubled reserves for soured debt in the fourth quarter amid the worst housing slump in a quarter century. Overdue consumer loans were the highest since 1992, the ABA said, a year after a U.S. recession ended. Delinquencies are a lagging indicator that often doesn't peak until late in an economic slowdown.

Overdue payments will keep rising in the first half of this year as ``food and gas prices remain stubbornly high and income growth is anemic,'' ABA chief economist James Chessen said.

Lenders' Shares Fall

Washington Mutual Inc., the largest U.S. savings and loan, fell 31 cents, or 2.6 percent, to $11.45 in New York Stock Exchange composite trading at 11:56 a.m. Bank of America Corp., the second biggest U.S. bank by assets, fell 22 cents to $40.08. Wachovia Corp., the No. 4 bank, fell 16 cents to $28.45. American Express fell 36 cents to $46.29.

The rise in the ABA index was driven by late payments for car loans, which make up two-thirds of all consumer loans with fixed balances, Chessen said in the statement. Auto loan delinquencies rose to 1.9 percent from 1.81 percent. Overdue mobile-home payments rose to 2.92 percent from 2.87 percent.

Overdue bank-card accounts rose 20 basis points to 4.38 percent in the quarter, according to the ABA, as the slowing economy made it harder for consumers to repay debt.

Federal Reserve Chairman Ben S. Bernanke acknowledged for the first time yesterday that a U.S. recession is possible because consumer spending, employment and homebuilding will deteriorate this year.

`Rapidly Slowing Economy'

The U.S. economy grew at an annual pace of 0.6 percent from October to December. Growth probably slowed to a 0.2 percent annual rate in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News.

``The rise in consumer credit delinquencies is consistent with a rapidly slowing economy,'' Chessen said. ``Stress in the housing market still dominates the story, but it's a broader tale.''

CIT Group Inc. said it will stop making new loans to U.S. students after lending costs soared. New York-based CIT, which quit originating private loans last year, said today it would no longer make government-guaranteed student loans.

At least 40 lenders ceased writing some form of student loans as the global credit-market slump drove investors from bonds backed by educational debt, according to UBS AG analysts. Sales of securities with student loans as collateral fell 65 percent in the first quarter, UBS wrote in an April 1 report.

MasterCard Inc. Chief Executive Officer Robert Selander said in a March 11 interview U.S. consumers are spending more on gasoline and food, crimping spending on luxury items. MasterCard is the second-biggest payment-card network after Visa Inc.

``What we see is a mix change in how consumers are spending,'' Selander said in the Bloomberg Radio interview. ``With the price of gasoline up approximately 30 percent from where it was a year ago, with commodities prices up and working their way into prices at the supermarkets, consumers are spending more of their money now on gas and groceries.''