Consumer Inattention, Disclosure Reminders, and the Refinancing Channel

Last registered on March 20, 2023
View Trial History

Pre-Trial

Trial Information

General Information

Title
Consumer Inattention, Disclosure Reminders, and the Refinancing Channel
RCT ID
AEARCTR-0009128
Initial registration date
March 23, 2022

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
March 24, 2022, 4:46 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
March 20, 2023, 10:16 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
Ireland
Region

Primary Investigator

Name
Christopher Palmer
Affiliation
MIT
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Shane Byrne
PI Affiliation
Central Bank of Ireland and Trinity College Dublin
Contact Investigator
PI Name
Kenneth Devine
PI Affiliation
Central Bank of Ireland
PI Name
Yvonne McCarthy
PI Affiliation
Central Bank of Ireland
PI Name
Michael King
PI Affiliation
Trinity College Dublin

Additional Trial Information

Status
Completed
Start date
2020-01-01
End date
2022-12-31
Keywords
Finance & Microfinance
Additional Keywords
mortgage refinancing, inattention, disclosure, monetary policy, reminders
JEL code(s)
D83, E58, G21, G28, G51, M38
Secondary IDs
Prior work
This trial is based on or builds upon one or more prior RCTs.
Abstract
This project analyzes data already collected from an experiment conducted by a large retail bank in Ireland in conjunction with the Central Bank of Ireland. Irish regulation mandates that banks send letters to their customers who have mortgages with variable rates that inform them of potentially attractive alternative rates available from that bank. The bank randomized consumers who were set to receive the required disclosure and sent treatment arms enhanced disclosures with varying disclosure design improvements (personalization, graphical representations, color coding, etc.), along with reminder follow-up letters to half the sample. Using data on whether consumers that received various types of disclosures refinanced their mortgage, we study how effective various interventions were and draw lessons about consumer attention and the optimal form of communication from a bank or policymaker to stimulate refinancing.
External Link(s)

Registration Citation

Citation
Byrne, Shane et al. 2023. "Consumer Inattention, Disclosure Reminders, and the Refinancing Channel." AEA RCT Registry. March 20. https://doi.org/10.1257/rct.9128-1.1
Sponsors & Partners

Partner

Name
Central Bank of Ireland
Type
government
URL
https://www.centralbank.ie/
Name
Large Retail Irish Bank
Type
private_company
URL
Experimental Details

Interventions

Intervention(s)
We analyze data from a large retail bank in Ireland that enhanced required mortgage disclosures for a random subset of representative variable-rate mortgage borrowers. Several treatment arms received enhanced disclosures with varying disclosure design improvements (personalization, graphical representations, color coding, etc.). Half of the control group and half of each treatment arm received reminder follow-up letters.
Intervention Start Date
2020-03-01
Intervention End Date
2020-06-30

Primary Outcomes

Primary Outcomes (end points)
take-up of mortgage refinancing opportunity, switching to an alternative mortgage product available from the same bank (internal switching), refinancing to an alternative mortgage product available from a different lender (external switching)
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
current mortgage interest rate, current mortgage maturity, current mortgage size, current mortgage delinquency status, type of mortgage product taken up
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The partner bank drew a representative sample of 12,050 variable-rate mortgage borrowers and divided them into twelve equally sized group: a control group and six disclosure treatment arms crossed with a reminder-letter treatment arm. This resulted in one control group, one group that received the standard control disclosure with a reminder follow-up letter, six treatment arms that received the mandatory disclosure with its design enhanced in one of six ways, and six treatment arms that received the design-enhanced disclosure with a follow-up reminder letter. The randomization was done by the bank. All treatments were examined by compliance officers at the bank and the Central Bank of Ireland to ensure that they met the regulatory requirements for this disclosure.
Experimental Design Details
Randomization Method
randomization done in office by a computer by the partner bank
Randomization Unit
individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
1
Sample size: planned number of observations
12,050
Sample size (or number of clusters) by treatment arms
1,700 individuals control, 1,700 individuals for each treatment, with half of all treatment and control individuals assigned to the reminder-letter treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
MDE = 1.56 percentage point increase in refinancing, corresponding to 0.05 standard deviation and 13% increase over baseline
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
MIT Committee on the Use of Humans as Experimental Subjects
IRB Approval Date
2022-03-23
IRB Approval Number
E-3923
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

There is information in this trial unavailable to the public. Use the button below to request access.

Request Information

Intervention

Is the intervention completed?
Yes
Intervention Completion Date
December 31, 2022, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
December 31, 2022, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
12,500
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
11,200
Final Sample Size (or Number of Clusters) by Treatment Arms
1613 borrowers control, 1587 borrowers treatment arm #1, 1616 treatment arm #2, 1602 treatment arm #3, 1629 treatment arm #4, 1585 treatment arm #5, 1568 treatment arm #6
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
No
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
Under-refinancing limits the transmission of accommodative monetary policy to the household sector and costs mortgage holders in many countries a significant fraction of income annually. We test whether targeted communication can reduce the attention frictions that inhibit transmission by partnering with a large bank to analyze a field experiment testing messages sent to 12,000 Irish households. While we find only small effects of disclosure design improvements, a reminder letter increases refinancing by 76%, from 8.9% to 15.7%. To interpret this reminder effect, we extend and estimate a mixture model of inattentive financial decision-making to allow for disclosure treatment effects on attention. We find that reminders increase the likelihood mortgage holders are attentive by over 60%, from 24% to 39%. A conservative back-of-the-envelope cost-effectiveness calculation implies that the average reminder letter generated €42 of mortgagor consumption (€605 per refinancing household). Our results illustrate that targeted central bank communication such as refinancing reminders could have a larger effect on refinancing than a standard policy rate cut. Reminders could further strengthen the refinancing channel and stimulate local consumption even when policy rates are at the zero-lower bound or set in a monetary union.
Citation
Byrne, Shane, Kenneth Devine, Michael King, Yvonne McCarthy, and Christopher Palmer. "The Last Mile of Monetary Policy: Inattention, Reminders, and the Refinancing Channel," March 2023. NBER Working Paper No. 31043.
URL
http://www.nber.org/papers/w31043

Reports & Other Materials