Increasing debt repayment by delinquent lenders
A modified letter sent to delinquent borrowers increased utilization of online payments
Treasury building front view
What was the challenge?
The Department of the Treasury’s Debt Management Services (DMS) was seeking to increase payment rates on delinquent, non-tax debts to Federal agencies. Agencies are required to refer debts to DMS at 180 days delinquent, at which point DMS must send collection letters within four days of receiving the debt referral.
What was the program change?
We modified the DMS collection letter using insights such as simplification, personalization, social comparison, and emphasizing the total debt owed, to increase the rate of debt recovery.
How did the evaluation work?
21,305 individuals with debts from six creditor agencies were randomly assigned to be sent either the new letter or the status quo letter. To determine the effectiveness of the letter changes, the new letter was compared to the status quo delinquency letter during a trial conducted over a six month period.
What was the impact?
The evidence from the trial suggests that the new letter did not affect overall payment rates on delinquent, non-tax debt. However, it did affect the method of payment by increasing utilization of online payments.