The auto finance industry showed signs of improvement as direct and indirect auto loan delinquencies both dropped in the third quarter 2009, according to the American Bankers Association.

Direct auto loan delinquencies fell nearly half a point to 2.04 percent of all accounts, and indirect auto loan delinquencies dropped to 3.15 percent of all accounts, compared to 3.26 percent of all accounts in the previous quarter. 

Consumer loan delinquencies fell in six other loan categories during the quarter, marking the first time since 2007 that so many loan categories experienced declines, according to the American Bankers Association.

The composite ratio, which tracks eight closed-end installment loan categories, fell 12 basis points to 3.23 percent of all accounts, compared to 3.35 percent of all accounts in the previous quarter.  Bank card delinquencies fell 24 basis points to 4.77 percent of all accounts. 

ABA Chief Economist James Chessen said the news was positive, but the weak economy and job losses continue to weigh on consumers.

"Delinquencies may be near their peak as job losses have slowed. Consumers are working hard to get their financial houses in order by spending less, saving more, and paying down debt. But there's still a bumpy road ahead with many people unemployed and family budgets stretched to their limits," Chessen said.

He also attributed the lower delinquency rates to banks writing off bad loans. "Banks are putting losses behind them, setting the stage for expanded lending to consumers as the economy recovers," he said.

The third quarter composite ratio is made up of the following eight closed-end loans.  All figures are seasonally adjusted based upon the number of accounts.

Increased Delinquencies:

• Home equity loan delinquencies rose from 4.01 percent to 4.30 percent.

• Mobile home loan delinquencies rose from 3.53 percent to 3.63 percent.

Decreased Delinquencies:

• Direct auto loan delinquencies fell from 2.46 percent to 2.04 percent.

• Indirect auto loan delinquencies fell from 3.26 percent to 3.15 percent.

• Marine loan delinquencies fell 2.28 percent to 2.21 percent.

• Personal loan delinquencies fell from 3.90 percent to 3.74 percent.

• Property improvement loan delinquencies fell from 1.79 percent to 1.66 percent.

• RV loan delinquencies fell from 1.72 percent to 1.64 percent.

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