10 Jan 2012

Vast Improvement in consumer debt according to Equifax Canada - but sustainability is a concern

Toronto, ON, Tuesday, January 10, 2012 – Equifax Canada’s National Credit Trends Report finds there was “remarkable” improvement in consumer delinquencies and bankruptcies in 2011, after seeing record high numbers in the previous two years during the financial crisis. 
 
The 90 plus day delinquencies for all credit products (excluding mortgages) has come down to a moderate 1.4 per cent - this rate was as high as 1.8 per cent during the height of the recession.  That .4 per cent improvement equates to $1.9 Billion. Consumer bankruptcies also dropped significantly to what appears to be normal volumes based on pre-recession days.
 
“Despite a 9 per cent reduction in consumer appetite for new credit in Q4 2011, consumer debt load continues to increase, but at a much lesser rate than observed in previous years,” says Nadim Abdo, Vice President, Consulting and Analytical Services, Equifax Canada.  “For example, average outstanding balances for all credit products increased at a rate of 8 per cent in 2010, while the rate of increase in Q4 2011 had dropped to nearly half of that.”
For detailed graphs, please go to: 
 
www.equifax.com/international/canada/Consumer_Credit_Trends_Q42011_English.pdf
 
“The only product that has shown a reduction in balances over the course of 2011 are credit cards,” Abdo adds, “and that in large part is due to changes in legislation and some restrictions placed on credit card issuers.” The report shows that average credit card debt declined in 2011, by 3.4 per cent compared to Q4, 2010.
 
Other report findings include:
 
  • Average bank installment debt grew at a slightly lesser rate than last year, showing a growth of 3.4 per cent versus Q4, 2010.
  • Average bank revolving loans grew at a much lesser rate than in Q4 2010, 1.4 per cent versus 6.4 per cent in Q4, 2011.
  • Average sales finance debt reflected double-digit growth throughout 2011, by 18.4 per cent versus 16 per cent in Q4, 2010.
     
“Although this appears to be a good news story for Canada, there remains some concerns about the high level of debt Canadians carry on average,” Abdo cautions.  “The main concern is how the Canadian economy may react to stressed global markets while our GDP is projected to grow at a very marginal rate in 2012.  Canadians are at record-high levels of indebtedness with little room to maneuver.  If there is to be another financial crisis, we can expect losses from serious delinquencies and bankruptcies.”