NCPA - National Center for Policy Analysis

Increases In Personal Debt Send Up Red Flags

April 11, 2001

Credit experts report that consumers are borrowing more -- and experiencing greater difficulty in paying off what they owe. Economist Mark Zandi at sees the process as a "scary sign."

Payment delinquency rates rose at the end of last year for just about every type of consumer loan. While economists expect late payments to rise when the economy slows, the extra stress on consumers comes at a time when analysts are banking on spending to keep the economy from falling into recession.

  • Mortgage delinquencies have surged to their highest level since 1992 -- with 4.54 percent of payments at least 30 days overdue in last year's fourth quarter, the Mortgage Bankers Association reports.
  • Personal bankruptcy filings rose to more than 1.4 million in the fourth quarter, after averaging about 1.2 million a year throughout 2000, says.
  • The American Bankers Association says credit card delinquencies rose in the final quarter of 2000 to 3.34 percent of all accounts -- from 3.21 percent in the previous quarter.
  • Consumer debt soared at an unexpectedly rapid 10.5 percent annual rate in February, according to the Federal Reserve.

Economists say the increasing trouble Americans are having paying off debt is not enough in itself to cause the economy serious difficulty. But the problem could worsen sharply if unemployment rises further and more consumers have trouble keeping up.

Source: George Hager, "Consumers Dig Perilously Deep into Debt," USA Today, April 11, 2001.

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