Timing is everything: How to stimulate debtors to pay up

A TFI research project by Gea Schonewille, Minou van der Werf and Dörthe Kunkel (Nibud)
Posted on October 28, 2019

Timing is everything: How to stimulate debtors to pay up” is one of the short-term research projects supported by the Think Forward Initiative.

Debt is a worldwide problem that forms a burden for many households. With limited resources they have to repay the debt over a period of time. Creditors often send letters to their debtors to inform them about their monthly installment. These letters request debtors to pay the amount within a few days. Could this form of communication and service be improved? In this research project Nibud researchers Gea Schonewille, Minou van der Werf and Dörthe Kunkel investigated whether simplifying the creditor’s letter and offering a flexible repayment can help households to repay their debt. Being able to change the monthly payment date (i.e. flexible repayment) debtors are allowed to match it with their income streams, helping them to repay their debt in time. The researchers conducted a natural field experiment to test their propositions. Are the interventions successful? And what are the researchers’ recommendations?

Download the research report below and find out!


A substantial proportion of Dutch households has trouble paying their bills. About one in five households are in debt (Schonewille & Crijnen, 2018). Having trouble paying bills or making ends meet, likely elicits an experience of financial scarcity. People that experience financial scarcity continuously have to make difficult trade-offs, because they have to juggle various expenses in order to make ends meet. Their budgetary concerns take up so much of their cognitive resources that they simply have less resources to spare for sounds (financial) decision-making, and it makes them more concerned with short-term problems (Mullainathan & Shafir, 2013). Thus, people that experience financial scarcity could use some extra help in making healthy financial decisions.

Fluctuating financial scarcity

Interestingly, results of a longitudinal study by Mani, Mullainathan and Zhao (2013) suggested that the experience of scarcity can fluctuate within a person. The IQ of sugarcane farmers in India fluctuated on average 13 points between a situation of scarcity (just before harvest) and affluence (just after harvest). Hence, the cognitive resources were more in a period of affluence in comparison to a period of scarcity, indicating that the available cognitive resources – and thus the capacity to make better financial decisions – could follow the available income at that moment. Research of Cavalho, Meier and Wang (2016) seems to corroborate these results even further: They found that Americans are more focused on short-term outcomes before payday in comparison to after payday. Thus, people that experience financial scarcity might make different decisions just after receiving their income, simply because they are cognitively less strained at that time.

Allowing for flexible payments

In collaboration with Flanderijn – a Dutch debt collection and bailiff organization – in the current research we investigate whether payment of arrears could be increased by taking into account the fact that financial scarcity can fluctuate. Adapting the timing of debt collection in such a way that it will align with people’s income streams, might be an effective way to activate people to pay their debts. There might, however, not be one simple answer to the question when would be a good time to send out a summon letter. There are no regulations regarding the timing of loan payments, and the number of people that are self-employed or have flexible contracts is growing each year (CBS, 2019; CPB, 2016; MKB, 2019). In a study among debtors, the Dutch National Institute for Family Finance Information (Nibud) already concluded that it would be wise to allow consumers to be more flexible in mandatory payments (Madern, Van der Werf & Van Gaalen, 2014). Households with financial constraints or (small) debts in particular indicated that more flexibility in payments would help them to make ends meet. This way they could adjust the payments to their income streams, instead of their income streams to their payments, which would require more advanced money management capabilities. To account for this wide variation in income streams, in this experiment we decided to let participants choose their own payment date.

Expectations: More payments and decreased financial scarcity

We expect that offering participants the possibility to match the debt collection process more closely to the income streams might 1) increase their payments, and 2) decrease their financial scarcity, because people simply get the break they so dearly need. This extra breath of fresh air might be enough to recharge their (monetary and cognitive) batteries, allowing them to pay their debt or at least energise them enough to reach out to Flanderijn (Dutch Debt collections company).

Additionally, allowing debtors to choose their own payment date, could also positively affect participants’ feelings of autonomy. A problematic financial situation might negatively affect the feeling of autonomy due to the fact that debtors cannot freely choose anymore what to spend their money on: They are repaying debts and have to manage their mandatory expenses, but do not have any room anymore for other expenses. We expect that making participants able to choose an payment date themselves, instead of being mandated to pay within a certain period, will increase their feeling of autonomy, accordingly increasing the motivation to pay their debt (Ryan & Deci, 2000).

The field experiment

5,877 participants were divided between four different conditions: control vs simplified vs flexible payment vs reminder.

Control condition
The control condition is equal to Flanderijns usual way of working. Participants received the regular letter and were summoned to pay their debt within five days.

Simplified condition
This group of participants were also summoned to pay their debt within five days (regular procedure). We did, however, revise the standard letter that Flanderijn used for their summons.

Flexible payment condition
These participants also received the simplified letter. Additionally, they could choose a date within the upcoming 30 days at which they wanted to pay their debt.

Reminder condition
Participants in the reminder condition did not only receive the simplified letter and the flexible payment procedure, but they also received a reminder at the day that they picked as their payment date. This reminder included a weblink that they could use to immediately pay their debt.

“Although perceived as a great service, flexible payments did not increase debt repayment.”

Results and recommendations

We did not find any differences between the four conditions. Participants that were offered the simplified letter and/or the flexible payment, did not pay more often, and did not pay a higher percentage of their debt back. Participants were, however, positive and appreciative about the fact that they could pick their own payment date.

Why did flexible payments not work?

In our opinion, there are two possible explanations for why offering participants the flexible payments did not increase the amount of payments that debtors made. First, we observed that the opportunity to choose a payment date was not utilised very often. Around 3.500 people received the option to choose their own payment date. Only 584 people (16%) visited the website at which they could pick a payment date. This could indicate that people did not understand what we asked them to do. However, the responses that we got on the questionnaire and the couple of interviews that we conducted, did not seem to indicate that the understanding is the problem. Furthermore, the debtors that did understand what they were supposed to do, perceived it as a good service of Flanderijn. Therefore, one of our recommendations is to research more thoroughly why people did not choose a payment date.

Secondly, a difficulty with the flexible payment and reminder condition was that it was only possible to choose a payment date at which the debtor would pay the full amount of his debt. No payment arrangements could be made online. The data shows that debts can vary from € 19 to above € 20.000, and 40% of the debts were above € 720. The interviews support this explanation: A common response to why people did not choose a date, was they had not enough money to pay all at once. Therefore, another recommendation is to also enable debtors to make payment arrangements online.

Why did simplifying the letter not work?

Another unexpected finding, was that the simplified condition did not yield more payments. We expected that simplifying the letter would lead to more payments, because previous similar studies suggest that simplifying communication is effective in activating people, and even that it would lead to more people paying their arrears (Behavioural Insights Team, 2015; Croonen et al., 2017; King et al., 2013). A possible explanation for this would be that the debts of our participants is more severe in comparison to the previous studies. Hence, it is possibly harder to activate this target group, due to the heightened level of financial problems. It takes at least two payment arrears to be transferred to a bailiff agency. This means that people who forgot to pay or have no difficulty making ends meet, are probably not in our dataset. Hence, debts are probably more severe, where a simple adjustment as simplifying the letter or letting people choose their own payment date is not enough to make them pay. Possibly simplifying the letter and offering flexible payments is more effective for suppliers of services and goods themselves instead of the bailiff agency.

Additional recommendations

Almost all payments that Flanderijn receives during this study were around the 20th of the month. And if the letter is send between the 10th and 30th of the month there is a higher chance of payments in comparison to when the letter is send between the 1st and 10th of the month. However, there is not one particular day at which most participants pay. So the default cannot be set at one day. An additional recommendation, is therefore that debt collectors could send out all letters on the 15th of the month, and give people 15 days to pay the arrear. This will most likely incorporate the income streams of most debtors.