For debt relief companies who have been suffering from a lack of consumer demand, there is news out today that indicates demand might be increasing in the near-term.
TransUnion says “total outstanding credit card balances increased 5% on a yearly basis. The increase indicates record growth, the highest yearly growth observed since 2008.”
If this trend continues then in a few quarters the phones of debt relief companies will begin to ring more often. For now however the rate of delinquency remains steady. “The report found that the national credit card delinquency rate (the ratio of borrowers 90 days or more delinquent with their general purpose credit cards) remained steady in the last year, hitting 1.47% in Q4 2014 compared to 1.48% in Q4 2013,” says TransUnion.
Some parts of the country are showing slowing demand for debt relief services if we use delinquency rates as a basis for indicating need. “The delinquency rates in the majority of the nation’s largest metropolitan areas continue to decline at a greater pace than the rest of the country, with Boston (-8.3%), Miami (-5.7%) and San Francisco (-5.5%) experiencing the largest yearly declines. Only two of major metropolitan areas experienced an increase in their yearly delinquency rate: Philadelphia (+0.3%) and Atlanta (+1.6%),” according to TransUnion.
According to the latest data, some states showed an increase in delinquencies according to TransUnion. “In Q4 2014, 21 states experienced yearly increases in their delinquency rates, led by Mississippi (10.6%), Iowa (7.1%) and West Virginia (6.5%). Alaska experienced the largest yearly decline (-13.7%), followed by Massachusetts (-7.4%) and Washington (-5.1%). “Card delinquency remains well controlled across the board,” said Verma. “Even in areas where delinquency increased year-over-year, the rates still remain well below historical averages.”
Another sign that this trend in increasing balances could predict a future demand for debt relief services is evidenced by the increasing originations of credit cards. However, sub-prime cardholders are not increasing at the same pace.
“The growth in originations for Q3 2014 indicates consumers in all credit tiers continue to receive more access to credit,” said Verma. “While non-prime originations have increased, the average credit line for non-prime consumers is shrinking, indicating strong risk management efforts from lenders. More consumers have access to card credit and are using that credit. Moreover, the vast majority of these borrowers are managing their cards well. In all, these factors point to a healthy, well-functioning card credit marketplace.”
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