Auto Loan and Credit Card Delinquencies Rising at Capital One

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iStock.com/Elenathewise

Bank holding company Capital One Financial Corp. (NYSE:COF) has reported that an increasing number of Americans are defaulting on auto and credit card loans.

Capital One posted its Monthly Charge-Off and Delinquency Metrics report with the U.S. Securities and Exchange Commission on Tuesday. The filing reports that the company saw an increase in credit card and auto loan delinquencies through the month of July.

Capital One is reporting that the 30-day performing delinquencies on credit cards issued to the domestic American consumers increased to 3.81% in the month of July. This is an 18-basis-point increase in delinquencies from the month of June.

Likewise, auto loan delinquencies for the 30 days of July were recorded at 5.76%, which is an increase of 36 basis points from June.

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Similarly, the lender also reported a jump in charge-offs—that is, the loan amount that Capital One does not expect to receive back from consumers.

The company reported an increase in net charge-offs on domestically issued credit cards to 4.79% in the month of July. Meanwhile, net charge-offs on auto loans in July rose to 1.8%, compared to the same period in June.

Capital One’s delinquency report followed the Fed’s quarterly report on household debt and credit, which identified the same trend in delinquencies.

The report published by the Federal Reserve Bank of New York earlier on the same day shows that an increasing number of Americans are defaulting on their credit card loans. Defaults are particularly high among Americans who fall under the lowest bands of credit scores.

Meanwhile, household debt is continuing to grow.

It is alarming that, despite their inability to pay off their loans, more and more Americans are relying on debt for consumption. What’s more, lenders are continuing to extend loans to non-prime and sub-prime borrowers.

American household borrowing is currently at all-time highs, jumping 0.9% in the second quarter of 2017 to $12.84 trillion. Capital One reported its net loans for the second quarter of 2017 to have jumped two percent to over $244.0 billion.

 

Sources

Capital One Financial Corporation Monthly Charge-Off and Delinquency Metrics,” U.S. Securities and Exchange Commission, last accessed August 16, 2017.

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Categories: Economic Decline, News

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