The Impact of Automated Reminders on Credit Outcomes: Results from an Experimental Pilot Program

Background: A recent evaluation of a nationwide credit counseling initiative found that credit counseling was associated with substantial reductions in revolving debt (e.g. credit card debt) and total debt levels. However, this research also found that credit counseling clients experience substantial financial distress, often from factors like job loss, which lead to an inability to meet their debt obligations. This study evaluates the impact of an automated email reminder program, which was embedded within the credit counseling process, intended to help counseling clients stay on track with their payment obligations and financial goals.

Experimental Design: We employ an experimental design to evaluate the relationship between automated reminders and counseling client outcomes. Counseling clients were randomly assigned into an offer group, which received a typical credit counseling session plus the offer of reminder enrollment, and a control group, which received only the credit counseling session. Outcome data for clients in this program come from credit attributes data collected by Experian. Credit data were available for 1,961 clients, 978 of whom were in the offer group and 983 of whom were in the control group. To assess the overall impact of offering reminders to credit counseling clients, credit outcomes for the entire offer group are compared to the control group who did not receive the offer of reminders (an intent-to-treat estimate). To estimate the impact of the reminders on those who enrolled, we use a two-stage regression model to first predict the selection of a client into the reminder program and then estimate the program’s effect on client outcomes after accounting for this selection bias.

Results: Thirty-four percent of clients offered the reminders enrolled in the program. On average, clients received 3.4 reminders over the program’s duration. The program had substantial impacts on client credit scores and the propensity to have both modest and severe payment delinquencies over the evaluation period. Clients offered reminders were five percentage points less likely to have severe (60- or 90-day) payment delinquencies (p<0.01) at any point over the treatment period and four percentage points less likely to have a minor (30-day) delinquency (p<0.05). At the same time, these clients saw a nine-point increase in credit scores relative to the control group (p<0.01). The two-stage analysis showed that clients who enrolled in the reminders were 14 percentage points less likely to have any severe delinquency than the control group (p<0.01), and their credit scores increased by 24 points relative to the control (p<0.01).

Key Takeaway: This pilot has shown promising results for embedding an automated reminder program in the credit counseling process, as counseling clients offered the reminders showed significant improvements in payment delinquencies and credit scores relative to counseling clients not offered the reminders. This research contributes to the emerging literature on the use of low-touch interventions like reminders to impact financial outcomes, and provides evidence supporting the rollout of similar programs in settings that involve interacting with financially-vulnerable populations.