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Credit Card Delinquencies Tick Up; Expansion into Subprime Seen As Biggest Reason
Thursday, January 5, 2017 6:30 AM

Another report indicates that credit card delinquencies are inching up as a result of increased lending to subprime borrowers in the last few years. TransUnion, which shared the data, also predicts even more borrowers will be late on their payments next year, due to rising interest rates.

The rise in late payments is not alarming, remaining well below their highs during the financial crisis, Nidhi Verma, senior director of research and consulting in TransUnion’s financial services business unit, told CBS Money Watch.

“Yes, it’s important to understand that the trajectory is going up,” Verma told CBS. “These surges in delinquencies are not the same as to what you would expect from a bubble.… These are actual natural consequences of [increased] credit access available to subprime borrowers.”

According to TransUnion, the percentage of credit card accounts held by subprime borrowers is at its highest level since 2010. In addition, the percentage of car loans held by people with weak credit is at its highest point since 2013, a trend that worries some economists, noted CBS. The Federal Reserve Bank of New York recently estimated that at least 1 million people are at least 90 days late on their car payments.

Verma noted that there are key differences between the auto market and the real estate sector, which imploded during the housing crash. “For one thing, the value of motor vehicles doesn’t fluctuate as wildly as homes,” she said. “We are not expecting those dynamics ever to occur in the auto finance market.”

The relative strength of the U.S. economy may also help some borrowers. Economic growth between July and September rose at its fastest rate in two years, while unemployment in November fell to 4.6 percent, its lowest level since 2007, CBS pointed out.