Case Study

Facilitating Payments by Matching Repayment Dates with Income

New data from the New York Federal Reserve shows that over four million Americans are more than 90 days late on their car loan payments. This is the highest late-payment rate since the height of the financial crisis. There are many reasons someone may default on an auto loan (job loss, health emergency, etc.).

And as the U.S. Financial Diaries project demonstrated so clearly, Americans face increasing income and expense volatility, which can quickly lead to financial distress.

Behavioral Diagnosis and Key Insights

We partnered with Beneficial State Bank, a California-based community development bank, to reduce the repayment burden on borrowers and lessen auto loan repayment delinquency and defaults. We performed a behavioral audit of the entire auto lending process, including a full day of field visits with a debt collector, several hours of listening to collections calls, and trying to buy used cars at six different car lots.

Our behavioral analysis revealed a number of insights specific to Beneficial Bank’s internal processes and barriers to repayment, as well as insights relevant to auto loan repayments broadly. One such insight is that almost universally, monthly loan repayments are due on the day that a borrower bought their car.

Qualitative research suggests that many people pay their rent and bills when they themselves get paid. People then spend the rest of their money until they are paid again. If their repayment due date falls far from a payday, it may be difficult to find the money to pay off their car loan.



We created a two-condition experiment that focuses on this barrier in the repayment process. After revamping the borrower onboarding call, in one condition the payment due dates will continue to fall on the day that the borrower happened to buy a car, and in the other condition the payment due dates will be moved to coincide with the borrower’s payday.

We will measure payment rates across conditions. The experiment is set to be launched in Q1 2018 to over a thousand Beneficial State Bank auto loan borrowers.