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Personalization Effect in Debt Collection via Regular Mail

Last registered on June 06, 2018
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Pre-Trial

Trial Information

General Information

Title
Personalization Effect in Debt Collection via Regular Mail
RCT ID
AEARCTR-0003042
Initial registration date
June 04, 2018

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
June 06, 2018, 3:27 PM EDT

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

Locations

Country
Latvia
Region

Primary Investigator

Name
Andris Saulitis
Affiliation
University of Latvia
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
On going
Start date
2018-06-04
End date
2018-07-09
Keywords
Finance & Microfinance
Additional Keywords
JEL code(s)
Secondary IDs
Abstract
The field experiment is carried out on 2,821 defaulted debtors with consumer debts in cooperation with a debt-collector enterprise in Latvia. The goal of the experiment is to examine the effect of three different regular mail debt reminder letters on paying back the debt. The control group receives a generic simple reminder, which resembles the usual reminder letter sent by the debt-collector at least once a year to each debtor. There are two treatment conditions. In both of them, a personalized letter is sent from a debt-collector's agent instead of a letter from the debt-collector's company. In one of the conditions the letter is sent and signed by a male agent, in the other one it is the female agent. Hence, the study has a factorial design with two factors: (1) personalization of the message and (2) gender of the debt-collector agent. The control group consists of 1,410 unique debtors while the two remaining groups consists of 706 (male agent) and 705 (female agent) individuals.
External Link(s)

Registration Citation

Citation
Saulitis, Andris. 2018. "Personalization Effect in Debt Collection via Regular Mail." AEA RCT Registry. June 06. https://doi.org/10.1257/rct.3042-1.1
Former Citation
Saulitis, Andris. 2018. "Personalization Effect in Debt Collection via Regular Mail." AEA RCT Registry. June 06. https://www.socialscienceregistry.org/trials/3042/history/208802
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
The field experiment replicates a study, which was carried out on a similar sample two years ago in the same debt collection enterprise in Latvia. Five different messages were randomly assigned to a sample of 2,000 debtors in total: (1) generic simple reminder, (2) social norm, (3) reputation concerns, (4) personalization of the message as if sent from a male/female agent and (5) combination of all previous treatments in one message. Additionally, half of all the letters were sent in red envelopes to examine the possible effect of salience on compliance. The letters were sent out on May 2nd, 2016. The most effective message was a personalized message from a debt-collector agent in a white envelope, although it was not statistically significant. This field experiment will repeatedly examine the effect of the personalization.
Intervention Start Date
2018-06-04
Intervention End Date
2018-06-07

Primary Outcomes

Primary Outcomes (end points)
The variable of interest is called compliance rate. It is constructed from the information on the payment status in each case.
Primary Outcomes (explanation)
The data will be gathered one month after the intervention, i.e., on July 9th, 2018. If a payment of any amount is made by the debtor to the debt-collector enterprise during the period June 5th, 2018 to July 9th, 2018, the case will be marked as “1”. If no payment will occur, the case will be marked as “0”. The compliance rate for each experimental condition will be calculated by diving the number of individuals who have paid with the total number of individuals in the group. The average treatment effect is the difference between the compliance rate.

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The control group receives a generic simple reminder, which resembles the usual reminder letter sent by the debt-collector at least once a year to each debtor. There are two treatment conditions. In both of them, a personalized letter is sent from a debt-collector's agent instead of a letter from the debt-collector's company. In one of the conditions the letter is sent and signed by a male agent, in the other one it is the female agent. Hence, the study has a factorial design with two factors: (1) personalization of the message and (2) gender of the debt-collector agent.
Experimental Design Details
Randomization Method
The randomization was done in office by a computer. Blocked randomization was implemented, using information on region, density of the living area, debt amount, debt due age, gender, debtor age and ethnicity on each debtor.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
2,821 individuals with defaulted consumer debts
Sample size: planned number of observations
2,821 individuals with defaulted consumer debts.
Sample size (or number of clusters) by treatment arms
The control group, which receives generic simple reminder, consists of 1,410 unique debtors.
Personalized letter is sent to 1,411 unique debtors. Within these, 705 individuals receive the message from a female agent and 706 individuals from a male agent.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
In order to reach 2% point average treatment effect of personalization, the total sample must consist of at least 2,092 individuals.
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

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

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
June 07, 2018, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
July 04, 2018, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
2821 individuals
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
2821 individuals
Final Sample Size (or Number of Clusters) by Treatment Arms
1410 Simple reminder, 705 Female agent, 706 Male agent
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