
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, November 22, 1995                   TAG: 9511220050
SECTION: BUSINESS                    PAGE: B-6   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

BORROWERS FALLING BEHIND ON PAYMENTS

With consumer debt at a record level, banks say borrowers are falling behind on repaying loans. And bankruptcies are on the rise.

The Federal Reserve said Tuesday that banks reported in a quarterly survey that slower economic growth also is contributing to a higher loan delinquency rate.

Loan officers at 33 of 54 banks questioned said consumer loan delinquency rates have risen over the past year. Most said the increase was expected, given a slowing economy and rapidly rising lending.

The Federal Reserve reported two weeks ago that consumer borrowing rose by $5.4 billion at an annual rate in September, the 28th straight advance. But the report also showed that the buildup in debt is slowing.

The September consumer credit increase was 6.6 percent at an annual rate, compared with a 12.7 percent rate in August.

Analysts said consumer spending is climbing at a slower pace as borrowing has shot up about 30 percent over the last two years.

Economists disagree on the severity of the debt crunch. Some contend that as a portion of household income, the money that Americans owe is still within a safe range and the economy is growing - albeit at a modest pace.

The most recent report by the American Bankers Association said the percentage of consumers behind in loan payments rose in the spring for the third straight quarter. The trade group said a seasonally adjusted 1.95 percent of loans were 30 or more days past due in the second quarter, up from 1.82 percent three months earlier.

In Tuesday's report, the Fed said banks reported that household demand for credit increased at a slower pace in the last three months. Only about 15 percent of the banks reported higher demand for residential mortgages, down from 50 percent in an August survey.

Some banks have tightened lending terms and standards and raised rates for consumers. But the Fed said most banks reported that any such moves were minimal.

The Fed reported three months ago that demand for consumer loans and mortgages grew sharply in the late spring and summer and banks made it easier for businesses to borrow cash.

On the commercial borrowing side, some banks said they eased standards for business loans because of aggressive competition among lenders. But only 10 percent of the banks said they were faced with greater demand for business loans.

by CNB