Consumer Delinquencies on the Rise Across Product Categories

Consumers are feeling the pinch of inflation across their financial products, from credit cards to auto and personal loans, according to Auriemma Roundtables’ industry data. As a result of this financial pressure, utilization of and/or demand for loan products is increasing while delinquencies rise.

Auriemma Roundtables’ data provides a unique view of consumer and industry health, thanks to its dozens of industry-leading benchmark studies. Data is collected directly from lender members, which represent more than 95% of the credit card and auto markets.

Below, we’ve summarized observations for the period ended Q1 2023 for three key products – credit card, auto loan, and personal loan.

Credit Card

Inflation has hit consumers, resulting in higher spending on their credit cards, with average balances growing 9.3% Y-O-Y to $2,669, according to Auriemma Roundtables’ March 2023 Card Credit Risk benchmark study. Utilization rate, or the proportion of revolving credit being used, increased 9.6% Y-O-Y to 23.6%.

As inflation causes consumers to spend more, cardholders are also defaulting at an increasing rate. According to Auriemma Roundtables’ Card Collections March 2023 benchmark, entry rates increased 15.6% Y-O-Y to 5.4%, signaling that more consumers were slipping into early delinquency. Meanwhile, annualized net credit loss and gross credit loss rates have increased more than 97% Y-O-Y, with most lenders reporting that they expect further worsening for the remainder of 2023. Many lenders have also noted an uptick in consumer usage of debt settlement companies, regardless of credit tier.

Since Q4 2022, Auriemma Roundtables’ member lenders have observed a deterioration in post-chargeoff recovery, materializing as lower average payment amounts – although Card Recovery Roundtable member lenders report that overall payment rates remain steady.

Additional trends include an increase in bankruptcy accounts, an increase in skip and cease and desist accounts, and more people seeking assistance in the forms of longer-term payment plans.

Auto Loans

Auto loan originations and leases are finally on the increase after a multi-year pandemic-era supply chain slowdown. Despite this welcome growth, many auto lenders reported increased roll rates and delinquencies at the start of 2023, predominantly in early to mid-stage accounts. Many auto lenders anticipate a continued degradation throughout 2023.

Entry rates upticked most notably for near-prime consumers (defined as 620-680 FICO score), increasing 13.7% Y-O-Y to 14.7%, per Auriemma Roundtables’ March 2023 Auto Collections benchmark study. Prime customers were not immune to this trend, with entry rates increasing 12% to 4.2% Y-O-Y.

Gross credit losses also deteriorated both in prime and near-prime segments. While lenders attribute some of this deterioration to a return to seasonal pre-pandemic delinquency levels, other reasons include declining credit quality and a decrease in tax season money.

Personal Loan

Personal loan providers are observing increased delinquencies while new originations shrink as a percentage of total accounts.

Payment rates have declined 25.7% Y-O-Y for personal loans, and the percentage of accounts that are one and two payments past due have both increased (by 5.6% and 32.1% Y-O-Y respectively), according to Auriemma Roundtables’ February 2023 Personal Loan Credit Risk benchmark study.

Meanwhile, lenders are tightening amid an uncertain market, with approval rates declining across all FICO tiers, according to Auriemma Roundtables’ Personal Lending Product Management Q1 2023 benchmark study. Despite this tightening, demand is strengthening, with booking rates increasing across all tiers.

Recession Readiness Dashboards

Auriemma Roundtables is monitoring leading and lagging signs of consumer stress across its dozens of industry benchmarks. For more information on our Recession readiness dashboards, contact Phylip Jones, Head of Business Development (pjones@roundtables.us).