Magazine article American Banker

Rise in Consumer Debt Burden Is an Illusion, MasterCard Says

Magazine article American Banker

Rise in Consumer Debt Burden Is an Illusion, MasterCard Says

Article excerpt

Economic statistics don't paint a true picture of the consumer debt burden, according to a MasterCard International study.

The report, written by Lawrence Chimerine, consulting economist to MasterCard, calls for an overhaul in the way consumer debt is measured. He urges that a task force of government and industry representatives develop a new method to gauge consumer debt.

Mr. Chimerine, managing director and chief economist of the Economic Strategy Institute in Washington, examined available measures of consumer debt and delinquency rates in 1996. He found that the average American consumer is in good fiscal health and that delinquency rate models need to be reengineered to improve the reliability of the statistics.

"We've got to do a better job now of measuring what's really debt, what isn't debt, how it's changed, if we're going to assess the financial well- being of consumers because of these changes that have taken place," Mr. Chimerine said in an interview.

The study defines consumer debt as the accumulation of secured and unsecured credit-credit cards, home mortgages, home equity lines, installment loans, and auto loans.

The study shows that growth in consumer debt has slowed to about 6% this decade, well below the double-digit increases in the 1970s and 1980s.

The release of Mr. Chimerine's study for MasterCard coincided with the American Bankers Association's report that bank card delinquencies were at record levels at yearend 1996. The ABA composite index of closed-end loans also increased slightly. …

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