Consumer credit increased briskly in June

U.S. consumers showed just how rough times are becoming by boosting their borrowing in June at the fastest pace in seven months.

The latest Federal Reserve statistical release reports the annual rate for consumer credit increased to 6.7 percent in June. That almost doubles the May figured of 3.8 percent.

The last time consumer borrowing increased so quickly was the third quarter of 2007 at 8.2 percent. That comes out to about $14 billion consumers borrowed in June.

Including May’s increase of $8 billion that people put on credit, the figures push consumer borrowing up to $2.586 trillion.

Demand for non-revolving credit, such as loans used to finance cars and personal loans, went up at a rate of 6.6 percent in June. In May, consumer borrowing rose at a 1.5 percent pace.

Reid Hamilton, floor manager at Auddie Brown Chevrolet in Darlington, said sales have been good at the dealership, adding that the majority of vehicles purchased involve financing with one of the company’s banks.

“During these times, we have a lot of people coming in looking for a fuel-efficient vehicle,” he said. “Financing is available and the majority of our customers have been looking to finance, especially right now. It’s rare to get people in with large down payments.”

Because of the decline in the economy, Reid said, people are financing more. But he said he also has potential customers who don’t always make the grade.

“Every customer that comes through that door, there’s a possibility for them to be a buyer,” he said. “Credit issues are always a problem, but we treat every customer that comes through the door with respect, whether they are able to finance and buy or not. Credit is nothing we want someone to feel bad about.”

Revolving credit, which consists just of credit cards, increased by 6.8 percent in June, which is down from a 7.6 percent growth rate in May.

These days, it’s not just college students who tend to live off credit. That’s why lending requirements for personal and other forms of loans have been tightened at some banking institutions.

Rick Saunders, president and CEO of First Reliance Bank, said his bank can attest to the increase in requests for loans.

The amount approved, however, has remained fairly steady and constant, he said.

“We are continuing to increase (in consumer lending),” Saunders said. “We don’t do a lot of financing in the new car business or with credit cards, so we aren’t feeling the increase from that. But our lending is constant.”

The Federal Reserve’s measure of consumer borrowing doesn’t include any debt secured by real estate, which would include mortgage lending and home equity loans — areas where Saunders said he could see the decline.

“What we are seeing is a decline in home equity loans, especially near the coastal area,” he said. “With the market and the times, people are hesitant because they just don’t know.”
Saunders added that with consumer borrowing increasing, there’s also an increased amount of delinquency in loan repayment, but primarily in the construction and development sector.