Massive Drop in Consumer Credit Reported for September

by Patrick Lunsford, CollectionIndustry.com

The Federal Reserve said Tuesday that September saw the largest drop in consumer borrowing in more than 14 years, led by a huge drop in auto and boat loans. But credit card borrowing increased by a substantial amount in the month.

Officially, the total drop in consumer credit was $1.2 billion. The last time such a large drop was registered was April 1992, when total consumer borrowing dropped by $1.8 billion.

Many on Wall Street were surprised by the drop. Analysts polled by MarketWatch were expecting consumer credit to increase in September by about $5.4 billion.

Despite the overall drop, revolving credit — like credit card loans — increased by $2.85 billion, an annual rate of 4.00%, to come in at $857 billion total outstanding. Non-revolving loans ? such as auto loans ? fell $4.05 billion in September.

The figures released by the Fed do not include mortgages and other real property-backed loans.

Although the drop in total consumer credit was large and shocking, there is a good chance the numbers could be amended next month. Case in point: in September?s report, the Fed adjusted Augusts? total consumer borrowing increase to a huge $9.13 billion, up from the initial estimate of $4.99 billion.