The latest Federal Reserve statistics are out for April, 2012 which show consumer credit increased at an annual rate of 3 percent in April. Revolving credit decreased at an annual rate of 4-3/4 percent, while nonrevolving credit increased at an annual rate of 7 percent.
This is not good news for debt relief providers that typically only address unsecured debt in their program.
As you can see from the chart below, the decline in demand for debt relief programs that focus on unsecured debt began at the end of 2008 and has called to a level that has remained stagnant for the last year with little change.
Now when we look at the pressure consumers are under from increasing secured debt at the same time it appears that beginning in 2009, secured debt continued it’s upward trajectory while unsecured debt began a steep decline.
What is most interesting about this is the historical significance of this event. If we go back thirty years or so you can see this is the first time this major short has occurred.
If I overlay U.S. recessions, in gray, from the past the decline in unsecured credit does not appear to be specifically related to a recession.
Part of this continued problem is the pressure student loans, which are included in the nonrevolving category are applying negative economic pressure on households. The total amount of student loan debt outstanding today exceeds the total amount of unsecured credit extended.
My belief is that until a solution is found to help people modify or better deal with primarily student loan debt and creditors remain restricted with extending “easy credit” then the level of unsecured consumer credit will remain significantly impacted.
When you compare the relationship between the levels of outstanding revolving debt and the search demand for debt relief topics, you can see a definite relationship.