U.S. consumers missing more debt payments
NEW YORK (Reuters) - U.S. consumers are falling further behind on their debt payments even as both borrowers and lenders struggle to keep the debt burden from getting even heavier in the face of a worsening recession and employment picture, a credit bureau executive told Reuters.
Dann Adams, president of U.S. Information Systems for Equifax Inc (EFX.N), said consumers are missing payments on mortgages, credit cards and auto loans, prompting lenders to further scrutinize borrowers' profiles for signs they should clamp down on credit.
"Lines of credit are being very closely monitored," said Adams, whose clients include banks struggling to prevent more bad debt from piling onto their balance sheets.
Banks are, for example, warily watching their credit card portfolios in anticipation that consumers whose home values are plunging will turn to credit cards as their home equity lines of credit are cut or canceled.
They are also preemptively culling inactive cards, seeing them as a potential liability: "If the consumer gets in trouble with someone else they'll start using the bank's card, and the bank doesn't want them to do that," he said.
Customers whose credit scores are on a downward trend are finding themselves on the receiving end of more aggressive action to limit or cut off credit.
And more lenders are requesting an Equifax product called "bankruptcy scores" that expresses the probability that an individual will be bankrupt over the next one to two years, Adams said.
But Adams is careful to note that this is "a supply-demand contraction." Consumers are likewise saving more, and growing leery of new debt.
The retrenching on both sides is part of a "rebalancing" underway in the banking system that will insure safety and soundness in the long term, Adams said. But closer in, the tightening of purse strings is exacerbating the recession as consumers miss payments, traumatized banks pull back and the economy contracts further.
"We're not seeing a real positive trend in anything we track," Equifax's Adams said.
SPENDING DOWN, SAVING UP
Economic conditions in the United States are expected to worsen.
Employers laid off almost 600,000 workers in January, the deepest cut in payrolls in 34 years, pushing the national unemployment rate up to 7.6 percent, according to a Labor Department report on Friday.
And in the fourth quarter, the U.S. economy shrank at nearly its fastest pace in 27 years, contracting at a 3.8 percent annual rate, the Commerce Department said.
That decline was actually not as deep as analysts expected, which translates into a burden for coming quarters and even grimmer forecasts, analysts said. Continued...
