Risk Managers Anticipate Credit Card Delinquencies to Rise

According to FICO’s most recently conducted quarterly study of bank risk professionals, many – some 40% – of bankers surveyed are bracing themselves for a rise in consumer loan delinquencies within the next six months. Additionally, risk-management executives anticipate there being a tightening of underwriting standards and do not foresee a recovery in the housing sector in the immediate future.

Just under half the respondents, 49.8%, revealed that they anticipate a rise in the average credit card balance over the next six months, according to collectionsrisk.com. This would be as a result of a combination of factors – with some consumers spending more on their cards and others making smaller monthly payments towards their card balances. However, 63.9% of them went on to say that they do not expect to see credit card use exceeding prerecession levels for at least another 5 years, which means that they do not have confidence in consumer ability to drive economic recovery.

Collectionsandcreditrisk.com reports that 48.3% of the FICO survey respondents indicated that they fear the United States is heading towards another recession.

Exactly half of the rick-management specialists stated that they believe it is not probable that housing prices within the U.S. to drop to 2007 levels anytime before the year 2020.

“Housing has been an enormous drag on the economy for over three years as U.S. households lost trillions of dollars in equity,” said chief analytics officer at FICO and head of FICO Labs Dr. Andrew Jennings according to insidearmcom. “While the housing sector will almost certainly gain strength during the next nine years, many bankers clearly believe prices will remain depressed for half a generation. This puts the devastation of the housing crash into perspective.”

Both existing and prospective small businesses may be facing an extremely challenging credit climate. The “credit Gap” that has existed over the past several quarters is expected to persist, with 57% of the bankers that participated in the survey indicating their belief to be that the amount of credit requested by small businesses will, over the next six months, increase but only 34% of survey takers expect to see any increase in the amount of credit that will be extended to small businesses.

“Small businesses have traditionally been providers of much-needed jobs during economic recoveries,” said Jennings, according to insidearm.com. “But the tight credit conditions facing small businesses today make it difficult for them to invest and expand. Rather than something to be counted on, the notion of small-business job creation seems, for the moment at least, aspirational.”

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.