Oil-patch states see rise in loan delinquencies

Subprime lending continues to rise, says TransUnion data


The number of Americans with a credit card reached a new high in the fourth quarter of 2015, as more subprime borrowers qualified for plastic, TransUnion said.

Delinquencies are rising, however, especially in states where energy industry workers are taking a hit, the credit bureau added.

"There are more nonprime consumers coming into the marketplace, so you would expect delinquency rates to go up -- and that's not a bad thing," said Ezra Becker, TransUnion vice president of research and consulting.  The modest uptick in late payments is an expected result of the expansion of credit, he said.

The figures were part of TransUnion's fourth quarter Industry Insights Report. The number of people with access to a credit card, including authorized users, reached 163.2 million, compared to 157.4 million a year earlier. Contributing to the growth in cards were 1.26 million more subprime borrowers than in the fourth quarter of 2014.The total number of card users has been generally climbing since bottoming out in 2011 during the aftermath of the Great Recession.

Loan type U.S. Louisiana Oklahoma North Dakota Texas West Virginia
Auto loans +6.4% +14.3% +15.3% +42.3% +14.9% +14.3%
Credit cards +6.9% +12.5% +14.6% +24.5% +12.9% +15.1%
Mortgage loans -27.8% -16.2% -15.0% -0.7% -24.0% -11.0%
Source: TransUnion data on serious (90-day+) delinquencies, comparing Q4 2014 to Q4 2015

While the number of borrowers rose, average debt levels were almost flat. The average debt on cards was $5,337 per card user, up just $10 from the fourth quarter of 2014. That reflects tight credit limits being issued to new subprime applicants, said Paul Siegfried, leader of TransUnion's credit card business.

"The average credit line has been decreasing, except for the super-prime segment," he said. The number of subprime card users continues to grow, but the pace of growth has slowed, indicating that "a lot of slack that was there has been taken up."

The rate of card users who were 90 days late on a general purpose card was 1.58 percent in the fourth quarter, compared to 1.47 percent in the corresponding period in 2014. Card delinquencies, though still relatively mild, are at their highest level since the fourth quarter of 2012, when they reached 1.62 percent.

Among states that host many jobs in the energy industry, fourth-quarter card delinquency rates were up 12.9 percent in Texas, 14.6 percent in Oklahoma and 24.5 percent in North Dakota, on a year-over-year basis.

While job losses in the energy industry have played a role in delinquency rates for the first time, the impact so far is mild and contained, with little impact nationally, Becker said. Unlike the collapse of the subprime housing bubble, oil industry woes are unlikely to spread to other parts of the economy, he said.  Displaced oil workers can find jobs in an otherwise strong economy, which is benefitting from lower fuel prices.

Consumer credit picture seen as solid
Like credit cards, auto loans experienced modest rises in late payments, while delinquencies in mortgages and personal loans improved.

The fraction of borrowers more than 60 days past due on an auto loan rose to 1.24 percent in the fourth quarter of 2015, from 1.16 percent a year earlier. The average auto loan grew to $17,999, from $17,453, as lending grew across all risk tiers, TransUnion said. The number of consumers with an auto loan rose 5.5 million to 75.6 million, the largest one-year increase on the books.

"Loan and lease originations and balance growth are outpacing auto sales, as more consumers choose to finance rather than pay cash for their vehicle," Jason Laky, head of TransUnion's auto and consumer lending business, said in a statement.

Previous coverage: Card debt under control

Published: February 17, 2016

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Updated: 10-23-2016

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