For years now I’ve been writing about debt relief forecasts and trends pointing at a decline in the need for debt relief services. Those predictions all came true.
But for the first time I’m seeing signs that there is a good chance of increasing demand for debt relief services such as credit counseling, debt settlement, and bankruptcy.
There are two factors that finally lead me to an increased business optimism for the industry. The first is in early days but consumer confidence is once again at pre-recession levels. This means people are in the mindset to begin spending again and we all know what happens following over confident spending.
As The Conference Board said, “A more favorable assessment of current conditions coupled with a more optimistic short-term outlook helped boost confidence. And while the majority of consumers were surveyed before the presidential election, it appears from the small sample of post-election responses that consumers’ optimism was not impacted by the outcome. With the holiday season upon us, a more confident consumer should be welcome news for retailers.” – Source
The second is the new pressure put on households through student loans and the growth in subprime auto loans. This will put more pressure on households that will be easily teetering with just a bit of overconfident spending.
TransUnion has just released data that projects an increase in delinquency rates is coming for credit cards and auto loans.
Now these delinquency rates will not be back to the 2009 levels of 2.97% for credit cards but they are rising again.
TransUnion said, “TransUnion projects the credit card delinquency rate will continue to rise to close 2017 at 1.82%, its highest level since Q4 2011 and a 6.1% increase from the expected Q4 2016 delinquency rate.
“After 22 straight quarters of declines in card delinquency between 2010 and 2015, we observed an increase in the third quarter of 2015. Since then, we’ve continued to observe higher delinquencies. We are keeping a close eye on these rising levels,” said Paul Siegfried, senior vice president and credit card business leader. “A moderate increase in card delinquency is natural as more subprime consumers have entered the market. Most importantly, we remain at relatively low levels of delinquency compared to the recession years.”
In Q3 2016, subprime account volume grew 14.7%, the largest growth rate since TransUnion began tracking this metric in Q3 2009. However, subprime accounts comprised only about 10% (39.6 million) of the 398.5 million credit card accounts in the third quarter of 2016.
The credit card balance per consumer is projected to rise at year-end 2016 and throughout 2017. TransUnion expects the average balance to rise 1.87% from $5,337 in Q4 2015 to $5,437 in Q4 2016. Average balances are projected to reach $5,509 by the end of 2017. “A better employment picture and rising median household income are contributing to an anticipated increase in personal spending, and credit card balances are expected to benefit from those positive economic forces in 2017,” added Siegfried.
From a consumer standpoint, borrowers should be aware that credit card interest rates may rise as a result of prime rate increases. Consumers who carry a revolving balance should plan for their monthly payment amounts to go up.”
So while we are not back at glory day demand rates, there are signs of improvement for the debt relief industry businesses.
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