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WASHINGTON, D.C. — As the Federal Reserve determined the
average interest rates on new-vehicle loans from commercial banks ticked to the
lowest point in recent memory, the American Bankers Association's latest Consumer
Credit Delinquency Bulletin showed how these deals are turning negative at a slightly
faster clip.

The association found that direct auto loan delinquencies
rose year-over-year during the third quarter from 0.92 percent to 0.95 percent.
ABA defines direct auto loans as contracts arranged directly through a bank.

Meanwhile, the Fed found that the average interest rate for
a 48-month, new-vehicle contract originated by banks during November stood at
4.82 percent, the lowest reading of 2012.

To put that level into perspective, here are the year-end averages
federal officials discovered for the previous five years:

—2011: 5.73 percent
—2010: 6.21 percent
—2009: 6.72 percent
—2008: 7.02 percent
—2007: 7.77 percent

Auto loan performance wasn't all negative, according to ABA's
bulletin. In fact, indirect auto loan delinquencies fell year-over-year during
the third quarter from 2.23 percent to 2.08 percent. The association classifies
indirect loans as contracts arranged through a third party such as a dealer.

The performance indirect auto loans helped the bulletin's composite
ratio, which tracks delinquencies in eight closed-end installment loan
categories, to fall 8 basis points to 2.16 percent of all accounts in the third
quarter, below the 15-year average of 2.40 percent.

The ABA report defines a delinquency as a late payment that
is 30 days or more overdue.

Bank card delinquencies dropped to an 18-year low as "consumers
strengthened their financial base amid economic uncertainty," the ABA said.

During the third quarter, bank card delinquencies dropped to
their lowest levels since 1994, falling 18 basis points to 2.75 percent of all
accounts and well below the 15-year average of 3.89 percent.

ABA chief economist James Chessen attributed the
improvement to consumers' ongoing efforts to better manage their finances.

"Consumers are paying close attention to their finances as
they continue to pay down debt in an uncertain economy," Chessen said. "The
conservative approach consumers have taken to credit over the last several
years has allowed them to better manage their debt and better position
themselves for the future."

While Chessen found the continued decline encouraging, he
noted the absence of a comprehensive improvement across categories — something
that hasn't been seen since the first quarter of 2012. 

"The lack of broad-based improvement remains a cause for
concern," Chessen said. "Some categories have reached historical lows leaving
little room for improvement. In addition, slow job growth, continued
uncertainty and falling consumer confidence could signal rising delinquencies
in the year ahead." 

The expiration of the payroll tax cut will also put
increased pressure on consumers.

"Many consumers will see their real disposable income take a
significant hit in the New Year," Chessen said. 
"Changes in payroll withholding will decrease disposable income,
reducing retail sales and making it more difficult for some people to meet
their financial obligations."

Chessen also noted that delinquencies in two home-related
loan categories rose in the third quarter.

"While there are strong signs that the housing market has
turned a corner, it will take several quarters before delinquency numbers begin
to reflect those trends," Chessen said. 

Chessen believes that consumer confidence will play a
critical role in our economy going forward. 

"Confidence has already fallen sharply and many consumers
have responded by closing their wallets," Chessen said. 


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