Cheap promises: Evidence from loan repayment pledges in an online experiment

- A natural field experiment on the effect of explicit pledges to repay loans on subsequent repayment behavior.
- Finds minimal impact of pledges, even when pledges were personalized and made salient through reminders.
- This result conflicts with other findings that suggest promises reduce dishonest behavior and behavioral biases can be addressed through framing manipulations.
- This suggests that failure to repay loans may not be related to dishonesty or behavioral biases, but rather that those who do not repay are simply financial unable to do so.

Across domains, people struggle to follow through on their commitments. This can happen for many reasons, including dishonesty, forgetfulness, or insufficient intrinsic motivation. Social scientists have explored the reasons for persistent failures to follow through, suggesting that eliciting explicit promises can be an effective way to motivate action. This paper presents a field experiment that tests the effect of explicit promises, in the form of “honor pledges,” on loan repayment rates. The experiment was conducted with LendUp, an online lender, and targeted 4,883 first-time borrowers with the firm. Individuals were randomized into four groups, with the following experimental treatments: (1) having no honor pledge to complete (control); (2) signing a given honor pledge; (3) re-typing the same honor pledge as in (2) before signing; and (4) coming up with a personal honor pledge to type and sign. I also randomized whether or not borrowers were reminded of the honor pledge they signed prior to the repayment deadline. The results suggest that the honor pledge treatments had minimal impacts on repayment, and that reminders of the pledges were similarly ineffective. This suggests that borrowers who fail to repay loans do so not because of dishonesty or behavioral biases, but because they suffer from true financial hardship and are simply unable to repay.