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May
2016
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TransUnion: U.S. Delinquency Rates Remain Low to Open 2016, Though Energy State Rises Beginning to Have Greater Impact on Nation

TransUnion’s (NYSE: TRU) Q1 2016 Industry Insights Report found that the oil slump continued to impact consumer credit performance in those states with economies more reliant on the energy sector. The report, powered by PramaSM analytics, indicated that serious delinquency levels for auto loans and credit cards continued to increase in energy-sector states such as North Dakota, Oklahoma and Texas.

Driven in part by these state-level increases, the national average for both serious credit card and auto loan delinquencies rose to levels not observed during the first quarter in at least three years. TransUnion analyzes year-over-year metrics to account for seasonality.

Serious delinquency on auto loans (60 or more days past due) hit 1.12% in Q1 2016, the first time it has topped 1% in the first quarter since 2011. Serious credit card delinquency rates (90 or more days past due) increased to 1.47% in Q1 2016, the highest level observed for the first quarter of the year since a 1.51% reading in Q1 2013. Credit card delinquency rates had remained flat at 1.37% during the first quarters of 2014 and 2015.

Ezra Becker, senior vice president of research and consulting in TransUnion’s financial services business unit
“Rising delinquency rates in energy-sector states such as Oklahoma and North Dakota are contributing to the uptick in the national delinquency rate for auto loans and credit cards. An increase of loans to non-prime credit risk borrowers also has pushed these delinquency rates up. Despite the delinquency rises in these credit products, overall levels of delinquency remain relatively low from a historical perspective. It’s also important to note that mortgage loans and the growing consumer loan space continue to either see declining or muted delinquencies. This is a result of an economy that is functioning well in terms of consumer credit, with an employment picture that is stronger than it has been in several years.”   
Ezra Becker, senior vice president of research and consulting in TransUnion’s financial services business unit

Energy States: Tale of Two Years –

Yearly Serious Delinquency Percentage Increase/Decrease

Credit Product

Years

U.S.

North Dakota

Oklahoma

Texas

West Virginia

Serious Auto Loan Delinquency % Change

Q1 2014 – Q1 2015

-0.2%

-3.0%

-21.4%

-0.5%

-2.6%

Q1 2015 – Q1 2016

13.4%

67.3%

18.8%

21.4%

26.1%

Serious Credit Card Delinquency % Change

Q1 2014 – Q1 2015

0.2%

5.5%

5.0%

0.3%

4.9%

Q1 2015 – Q1 2016

6.9%

28.3%

14.3%

14.3%

19.8%

These results, along with the findings discussed below, were reported in the latest TransUnion Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.

TransUnion Insights: Inside the Credit Card Market

The latest Industry Insights Report found that the total balance for credit cards reached nearly $644 billion in the first quarter of 2016, an increase of 6.4% and the highest year-over-year growth observed in more than six years. The total balance was up from $605 billion in Q1 2015.

Serious credit card delinquency reached 1.47% in Q1 2016, a 6.9% increase from 1.37% in Q1 2015. Delinquency rates, though, remain below the average first quarter delinquency rate of 1.52% since Q1 2011 and are more than a full percentage point below those observed in the 2009 timeframe.

Paul Siegfried, senior vice president and credit card business leader for TransUnion
“In the last two years, we’ve seen a deliberate and controlled resurgence of subprime lending in the credit card market. The increase in delinquency does not signal a cause for concern and is a natural reflection of more non-prime consumers gaining access to card credit.”
Paul Siegfried, senior vice president and credit card business leader for TransUnion

Credit card originations, viewed one quarter in arrears (to ensure all accounts are reported and included in the data), grew by 2.1 million from 14.42 million in Q4 2014 to 16.52 million in Q4 2015. Growth was observed across all risk tiers, with the slowest year-over-year growth rates observed in the prime risk tier (14.3%) and super prime risk tier (10.6%). Prime consumers also experienced the slowest balance growth in Q1, at 4.5% year-over-year growth.

“The slow growth in balances and originations for the prime risk tier may in part be an impact of consumer substitution with unsecured personal loans,” added Siegfried. TransUnion research has found that FinTech lenders have developed a niche within the prime and near prime risk tiers.

Trends in the Credit Card Market

Credit Card Metric

Q1 2016

Q1 2015

Q1 2014

Q1 2013

Delinquency Rate (90+ DPD) Per Borrower

1.47%

1.37%

1.37%

1.51%

Average Debt Per Borrower

$5,193

$5,142

$5,168

$5,207

Originations*

16.52 million

14.42 million

13.46 million

11.58 million

*Note: Originations are viewed one quarter in arrears, reflecting data for the prior quarter (Q4 2015).

TransUnion Insights: Inside the Unsecured Personal Loan Market

Total unsecured personal loan balances reached $92 billion in Q1 2016 and have more than doubled since Q1 2012, when total balances stood at $45 billion. Unsecured loans are offered by banks, credit unions, and finance companies, including FinTech lenders (online and marketplace).

The average unsecured personal loan balance was $7,555 in Q1 2016, a 9.6% increase from $6,892 in Q1 2015. In the first quarter of 2016, the serious delinquency rate for unsecured personal loans (60 or more days past due) remained steady at 3.53%, unchanged from Q1 2015.

Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion
“Continued employment growth and a strong economy, as well the entrance of FinTech lenders, have contributed to the remarkable expansion of unsecured lending,” said Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion. “Consumers in all risk tiers continue to take on personal loans. Delinquencies remained steady in the first quarter and are below the levels observed in prior years.”
Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion

Viewed one quarter in arrears (to ensure all accounts are reported and included in the data), unsecured personal loan originations exceeded 4 million for the first time in Q4 2015. Originations grew 16.4% to 4.01 million from 3.44 million in Q4 2014. At year-end 2015, 35% of originations were to subprime borrowers and 32.5% of new loans were originated to consumers in the near prime risk tier.

Trends in the Unsecured Personal Loan Market

Unsecured Personal Loan Metric

Q1 2016

Q1 2015

Q1 2014

Q1 2013

Delinquency Rate (60+ DPD) Per Borrower

3.53%

3.53%

3.69%

3.75%

Average Debt Per Borrower

$7,555

$6,892

$6,343

$5,920

Prior Quarter Originations*

4.01 million

3.44 million

3.14 million

2.73 million

*Note: Originations are viewed one quarter in arrears, to ensure all accounts are reported and included in the data.

TransUnion Insights: Inside the Auto Loan Market

In Q1 2016, 76.37 million consumers had an auto loan, an increase of 5 million from the first quarter of 2015. The number of consumers with an auto loan grew 7.1% from 71.29 million in Q1 2015.

Serious auto loan delinquency rose to 1.12% in Q1 2016, a 13.1% increase from 0.99% in Q1 2015. Despite the yearly increase, the delinquency rate remains below the levels observed in Q1 2010, when the delinquency rate reached 1.21%.

Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion
“For the first time post-Recession, more than 76 million consumers have an auto loan, a promising sign for the remainder of 2016. More non-prime consumers have an auto loan and parts of the country are feeling the impact of lower energy prices, contributing to a mild increase in delinquency.”
Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion

Viewed one quarter in arrears (to ensure all accounts are reported and included in the data), auto loan originations grew 5.4% year-over-year to 6.51 million in Q4 2015, up from 6.17 million in Q4 2014. The average new account balance (reported one quarter in arrears) reached $20,469 in Q4 2015, its highest level since the Recession. The average new account balance increased 2.9% from $19,890 at year-end 2014.

Trends in the Auto Market

Auto Lending Metric

Q1 2016

Q1 2015

Q1 2014

Q1 2013

 Delinquency Rate (60+ DPD) Per Borrower

1.12%

0.99%

0.99%

0.94%

Average Debt Per Borrower

$18,058

$17,508

$16,865

$16,195

Prior Quarter Originations*

6.51 million

6.17 million

5.70 million

5.30 million

*Note: Originations are viewed one quarter in arrears, to ensure all accounts are reported and included in the data.

TransUnion Insights: Inside the Mortgage Market

In Q1 2016, serious mortgage delinquency (60 or more days past due) declined to 2.25%, down nearly 24% from 2.95% in the first quarter of 2015. The delinquency rate has declined for 10 straight quarters, and is now less than one-third of the 6.94% peak recorded in Q1 2010.

Approximately 67 million consumers had a mortgage in Q1 2016, down from 67.4 million in Q1 2015. Mortgage originations, viewed one quarter in arrears (to ensure all accounts are reported and included in the data), increased 10.6% to 1.60 million in Q4 2015, up from 1.45 million in Q4 2014.

 Joe Mellman, vice president and mortgage business leader for TransUnion
“It is heartening to see that, despite concerns that TRID implementation would negatively impact mortgage originations, we still observed growth at the end of 2015. We are well positioned for the spring home buying season, as lenders are more familiar with TRID requirements and strong employment and low interest rates continue.”
Joe Mellman, vice president and mortgage business leader for TransUnion

The average new account balance, reported one quarter in arrears, grew 6.7% to $220,050 in Q4 2015 from $206,197 in Q4 2014. However, it remained slightly below the recent peak of $222,475 observed in Q1 2015.

Trends in the Mortgage Market

Mortgage Lending Metric

Q1 2016

Q1 2015

Q1 2014

Q1 2013

Delinquency Rate (60+ DPD) per Borrower

2.25%

2.95%

3.59%

4.43%

Average Debt Per Borrower

$191,529

$187,175

$186,836

$182,840

Prior Quarter Originations*

1.60 million

1.45 million

1.39 million

2.33 million

*Note: Originations are viewed one quarter in arrears, to ensure all accounts are reported and included in the data.

Please visit http://www.transunioninsights.com/IIR for more charts and details about TransUnion’s Q1 2016 Industry Insights Report or register for TransUnion's Q1 2016 Industry Insights Webinar.

About TransUnion (NYSE:TRU)

Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.

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