No doubt the economy is strong and perhaps getting even stronger. Consumers are feeling their oats, too, and (good news for business) spending trends are continuing to be strong right into the teeth of the best season for spending ever: the Christmas season!
With the effects of potentially more economic stimulus coming from Congress (another positive), the ‘great ship’ of consumer debt will likely continue to stay on course and likewise reach previously unheard-of record levels.
Is this a good thing?
Well, it is time once again to put our wonk hats on and recap for you key findings published in the most recent Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit (download the report here).
- A record again! For the 13th consecutive quarter consumer debt balances increased setting yet another new all-time record.
- Aggregate consumer debt from all sources now has exceeded the previous record set in the third quarter of 2008 by $280 billion!
- Total household indebtedness was $96 trillion (yes, trillion with a ‘t’).
- Debt increased in the third quarter of 2017 by $116 billion (0.9%).
- With the exception of home equity lines of credit, all sources of household debt increased including mortgage, auto, credit card and student loan debt.
Some disturbing trends are developing with regard to delinquencies, however:
- The aggregate rates of delinquency went up slightly in the third quarter of 2017 to 4.9%.
- Of the $630 billion that is delinquent, $408 billion is in a serious stage of delinquency (more than 90 days past due).
- Importantly, delinquency rates for credit cards and auto loans increased as well. The Fed notes that in particular credit card delinquency has been steadily increasing over the last year.
Why is this information important?
As a licensed debt collection agency, it is our business to keep on top of important trends in consumer financing and debt levels. We feel that this data can be a bellwether of the financial health of the consumer and in particular their ongoing ability to pay their debts.
Unsustainable levels of indebtedness will have a substantial impact on our client’s businesses and thus the need to keep informed about these important trends.
So far it appears that, given continuing economic growth, low unemployment, and generally manageable debt levels, the consumer will continue to pay their debts.
How high can consumer debt go? That is anyone’s guess but we all know there is a top and records of this type seldom last for long, nor do they come without consequences. We continue to urge vigilance on the part of our clients with respect to their credit practices and encourage them to maintain a solid handle on their outstanding debts. We strongly suggest moving through the collections process with all due speed and as soon as a debt requires more concerted action you reach out to us, your debt collection specialists. We are here to serve you!