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Social Norm and Debt Repayment: Field Experiments in a Debt-collector Enterprise

Last registered on July 05, 2023
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Pre-Trial

Trial Information

General Information

Title
Social Norm and Debt Repayment: Field Experiments in a Debt-collector Enterprise
RCT ID
AEARCTR-0001043
Initial registration date
February 07, 2016

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
February 07, 2016, 5:53 PM EST

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

Last updated
July 05, 2023, 12:42 PM EDT

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

Locations

Country
Latvia
Region

Primary Investigator

Name
Andris Saulitis
Affiliation
University of Latvia
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
Completed
Start date
2016-02-08
End date
2016-04-04
Keywords
Finance & Microfinance
Additional Keywords
Debt collecting, debt compliance, social norms
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
The study will consist of two field experiments in cooperation with Latvian debt-collector enterprise. The research will examine the extent to which a descriptive social norm and a personalization motivate consumers to pay back their debts rather than to give up and default. Both the effectiveness of communication and the content will be examined. It will provide information on the strenght of social norms regarding the financial discipline among the households in Latvia.
External Link(s)

Registration Citation

Citation
Saulitis, Andris. 2023. "Social Norm and Debt Repayment: Field Experiments in a Debt-collector Enterprise." AEA RCT Registry. July 05. https://doi.org/10.1257/rct.1043-2.1
Former Citation
Saulitis, Andris. 2023. "Social Norm and Debt Repayment: Field Experiments in a Debt-collector Enterprise." AEA RCT Registry. July 05. https://www.socialscienceregistry.org/trials/1043/history/208798
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
During the experiments debtors will be randomized among either to a control group, which will not receive any messages, or a treatment group to receive weekly assigned mobile text messages and/or e-mails. The research will examine separately and in combination four kinds of treatments and their effect on compliance: (1) a simple reminder; (2) a descriptive social norm; (3) personalization in terms of the sender/debt-collector; (4) personalization in terms of the debtor.
Intervention Start Date
2016-02-08
Intervention End Date
2016-04-04

Primary Outcomes

Primary Outcomes (end points)
The outcome variable in the experiments is the level of debtor’s deviance. In Experiment 1, it includes three possible outcomes: (1) debtor does not respond; (2) debtor communicates; (3) debtor has agreed upon the repayment plan. At the beginning of Experiment 1, the debtors were either in the (1) or (2) group. In Experiment 2, the deviance level will be measured as a continuous variable, measuring the number of days, which the debtor deviated from the repayment plan. The variable ranges from “0”, which means that the payment was made on time, to “35”, when the debtor’s repayment plan is cancelled by the debt-collector.
In order to monitor the results during the experiments, every Monday the debt-collector company will report on the status of each case. These status codes will provide the information on the performance of the level of deviance in each of the groups
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The study includes two field experiments in Latvia in cooperation with the debt-collector. In both of them, treatment groups will receive e-mails and/or mobile text messages. The differences are in terms of type of the debtors in the samples. In Experiment 1 invidividuals are in a status of a default, but in Experiment 2 the consumers have started to repay their debt. The debtors will receive the treatment through both communication channels (e-mails and text messages). In case the information on debtor will contain only one out of two communication channels, the debtor will be contacted via the only available channel.
Experimental Design Details
Experiment 1: Weekly messages with an invitation for the receivers to pay back the debt in arrears. The types of debts in this group are consumer credits for small purchases, fast-credits and other small amount debts;
Experiment 2: Monthly messages of reminders to the debtors in the process of repaying various types of debt.

Before the start of the experiments, debtors in Experiment 1 were not contacted by the debt-collector for two weeks. All the debtors in the Experiment 2 before the start of the experiment, if they had a payment due, received monthly payment reminders, which were similar to the simple reminder treatment in the Experiment 2.
Randomization Method
Randomization will be done in office by a computer.
Randomization Unit
Cases from the debt-collectors portfolio.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
Experiment 1: 27,209 cases
Experiment 2: 2,845 cases
Sample size: planned number of observations
27,209+2,845=30,054
Sample size (or number of clusters) by treatment arms
Experiment 1: Control group 5,441, treatment group at least 2,720
Experiment 2: Control group 569, treatment group at least 284
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
Ethics Committee at the European University Institute
IRB Approval Date
2016-02-04
IRB Approval Number
0000
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
March 31, 2016, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
April 03, 2016, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
27447 cases
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
Experiment 1: 24,950 cases
Experiment 2: 2,497 cases
Final Sample Size (or Number of Clusters) by Treatment Arms
Experiment 1: 4990 No message; 2495 any other treatment arm Experiment 2: 484 No message; 244 any other treatment arm
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
No
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
This study aims to explore how various nudges that have successfully increased the payment discipline among borrowers with performing loans affect the behavior of the defaulted debtors. In three field experiments involving 32,000 borrowers, debtors were randomly assigned to receive reminders that used personalized language, mentioned economic consequences, and prosocial motives. In one experiment, the design of the envelope varied. The experimental results show that simply nudging defaulted individuals does not work. Although every next reminder that debtors receive increases the payment rate, the effect is rather small. Moreover, sending reminders when the promise to make a payment on a debt has already been made can trigger a repeated default. I also find that a red envelope design backfires on collection efforts. The findings offer a fuller understanding of the behavior of defaulted debtors and suggest policy implications in debt repayment and recovery of non-performing loans.
Citation
Saulı̄tis, A. (2023). Nudging debtors with non-performing loans: Evidence from three field experiments. Journal of Behavioral and Experimental Finance, 37, 100776. https://doi.org/10.1016/j.jbef.2022.100776
URL
https://doi.org/10.1016/j.jbef.2022.100776

Reports & Other Materials