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Good risk managers aren’t just good at mitigating the effects of delinquency and default. They excel at seeing risk coming. This gives them time to prepare and increases their chances of reducing loss severity. One of the places they look to assess the possibility of future risk is at the consumer debt load.
Here’s a glimpse at what they’re seeing now.
The U.S. consumer debt landscape is shifting rapidly—and not in a favorable direction for lenders. While some indicators suggest overall financial health is stable, a closer look reveals that auto lenders, in particular, are facing rising risks as delinquencies climb and borrower stress intensifies.
At the close of 2024, total U.S. household debt surged to an unprecedented $18.04 trillion, marking a $93 billion increase from the previous quarter.
Credit card balances alone escalated by $45 billion, reaching a record $1.211 trillion. Auto loan balances also rose by $11 billion, totaling $1.66 trillion.
While the debt level is staggering, the trendline also carries a lot of information. We see it clearly if we look back over the last few decades. In Q1 1999, credit card balances stood at $478 billion. By Q4 2019 (pre-pandemic), credit card debt had grown to $927 billion.
While some financial institutions report that consumers are managing debt repayments effectively, the broader picture indicates growing financial strain, especially among lower-income households.
The proportion of consumers making only minimum credit card payments has reached a 12-year high, signaling potential challenges ahead.
Auto lenders are witnessing a concerning uptick in delinquencies. By the end of 2024, 30-day auto loan delinquency rates climbed to 3.52%, doubling the rate from the pandemic low in 2021.
More alarmingly, subprime borrowers are defaulting at unprecedented levels, with 60-day delinquencies reaching 6.56% in January 2025, up from 2.58% in May 2021.
These rising delinquency rates are not confined to subprime borrowers; they span across various credit scores and income levels, indicating a systemic issue. The combination of high vehicle prices and elevated interest rates has led to increased monthly payments, placing additional pressure on consumers.
Proactive Engagement: A Strategic Necessity
In this challenging environment, early and proactive engagement with borrowers is crucial.
However, establishing effective communication can be difficult, particularly when borrowers are unresponsive to traditional outreach methods.
Face-to-face interactions have proven to be one of the most effective strategies for re-establishing contact and trust with delinquent borrowers.
While increased consumer spending driven by credit can boost economic growth in the short term, the current high debt levels pose significant risks to long-term financial stability. Both consumers and financial institutions need to exercise caution and implement responsible borrowing and lending practices to mitigate these risks.
Now is the time for lenders to engage risk mitigation outsourcing firms with the expertise to get borrowers back on track.
Sometimes, it just takes a knock on the front door to let borrowers know that their financial institution is a partner who cares about their success. This is one of our specialties.
NCCI Services offers a cost-effective solution to this challenge. With a nationwide network of professional field agents, NCCI facilitates in-person visits to borrowers' homes, providing a personal touch that often leads to more productive conversations and resolutions. This approach not only enhances the likelihood of recovering delinquent accounts but also helps maintain positive customer relationships.
As consumer debt continues to rise and auto loan delinquencies reach new heights, lenders must adopt proactive measures to mitigate risks. Engaging borrowers early through personal, face-to-face interactions can make a significant difference in recovery efforts.
Contact NCCI Services today to learn how our tailored solutions can support your risk mitigation strategies and help you navigate the evolving financial landscape.
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