We make it a point to regularly recap for our clients the state of consumer debt in our country.  This recap is based on the “Quarterly Report on Household Debt and Credit” as it is reported by the New York Federal Reserve.  Their latest report is for the last quarter of 2017 (published in February 2018).

We realize this does not always make for the most engaging reading. This is important information, however, especially with regards to anticipating the potential impact increasing consumer debt may have on our clients.

The key takeaway:  In the most recent report, aggregate household debt continues to grow at a record setting pace with no signs of that growth abating.

Aggregate household debt has now increased for fourteen consecutive quarters and stands at $13.15 trillion.

This was an increase of $193 billion (1.5%) from the third quarter of 2017.

This was also $473 billion higher than the previous record peak of $12.68 trillion set in third quarter of 2008.

Overall household debt has increased by nearly 18% since the bottom of the ‘great recession’ in 2013.

Some other key details of the report include:

• Mortgage balances, the biggest piece of household debt, increased “substantially” during the fourth quarter.
• Mortgage balances shown on consumer credit reports on December 31 stood at $8.88 trillion, an increase of $139 billion from the third quarter of 2017.
• Non-housing debt increased $58 billion.
• Auto loans grew by $8 billion.
• Credit card balances increased by $26 billion.
• Student loans increased by $21 billion.

In general, the consumer seems to be pretty comfortable with their economic outlook, generally financially healthy and able to pay off their debts:

• Aggregate delinquency rates did improve slightly in the fourth quarter.
• Debtor credit scores seem to be solid and the Fed reports “The median credit score of newly originating borrowers declined slightly for mortgages, to 755 from 760. For auto loan originators, the median score increased to 707 from 705. Pretty decent scores all things considered.

Not all is rosy, however.

• $619 billion of debt is in some state of delinquency.
• $406 billion of delinquent debt is seriously delinquent (at least 90 days late).
• Delinquency for credit card balances with aging of more than 90 days has been increasing noticeably year over year.
• Additionally, delinquency for auto loan balances 90 days or older has been slowly increasing since 2012.

Want to read more?  You can find the press release and links to the report here.

So, are we in credit ‘la-la land?’  To some degree, yes.

While the economy continues to strengthen, recent interest rate increases by the Federal Reserve, and the promise of more to come, could certainly increase the cost of borrowing for consumers, as well as impact their ability to take on additional credit.  Further, unforeseen elements of economic instability have recently been injected into the system causing notable gyrations in stock and bond prices.  Some hints that inflation may be increasing also shadow the consumer and may impact their buying decisions as well as their desire to take on more debt.

Of course, the recent tax cuts enacted at the federal level may allow consumers some more wiggle room to pay down their debts if the increases in paychecks provide the incentive to do so.

Time to worry?  Well, time to stay vigilant as we have urged in our other recaps.  We feel it is vitally important that our clients stay on top of their debts and involve our professionals at the earliest possible moment to ensure that delinquencies do not get out of hand.  Let us help you recover your debts efficiently and professionally, especially during this time of year when tax refunds often allow consumers to catch up on their bills and bad debts.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.