Psychology: Loan officers are more likely to turn down applications before lunch breaks

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Just don't make appointments with your credit expert shortly before lunch break, at least not when it comes to more complex inquiries: Then the probability is higher that the corresponding application will be rejected.

At least that's what Simone Schnall and Tobias Baer from the Department of Psychology at the University of Cambridge in the UK found. Specifically, the two scientists analyzed the work of 30 loan officers at a major bank over a month. The decisions on thousands of loan applications were included in the study, published in the specialist magazine "Royal Society Open Science". This involved rescheduling plans for customers who already had a loan but asked the bank to adjust these repayments due to repayment difficulties.

According to the study's authors, such decisions are demanding: Loan officers would have to weigh the customer's financial strength against risk factors that reduce the likelihood of repayment. Errors here could be costly for the bank. Approval of such an application can, on the one hand, result in a loss compared to the original payment plan. On the other hand, if the restructuring is successful, this loss can be significantly lower than if the loan is not repaid at all, according to the authors.

The researchers observed that the point in time at which the decision was made played an important role on average.

"In the morning, the loan officers were more willing to make the difficult decision of granting a customer more favorable loan repayment terms, but at midday they showed decision fatigue and were less inclined to agree to a loan restructuring application," explains lead author Schnall.

"After lunch, they probably felt more rested and able to make better decisions."

"Even decisions that we assume are very objective and guided by specific financial considerations are influenced by psychological factors."

Tobias Baer, ​​psychologist from the University of Cambridge

Additionally, the study found that customers whose debt rescheduling application was approved were more likely to repay their loan than if they were instructed to stick to the original repayment schedule. The tendency of loan officers to turn down more applications around lunchtime was thus associated with a financial loss for the bank, and the decision of the loan experts before lunch was more often wrong. As the researchers calculate, the bank could have raised more than $ 500,000 in additional loan repayments in a month if all decisions had been made early in the morning.

"Even decisions that we assume are very objective and guided by specific financial considerations are influenced by psychological factors," sums up author Baer. The results of the study underlined that regular breaks during working hours are important in order to maintain a high level of performance. Last but not least, they showed that cognitive exhaustion in the financial sector - and perhaps in other industries as well - could lead to significant economic costs.

Decision fatigue describes the fatigue that arises from having to make difficult decisions over a long period of time. Studies in the past have shown that people in such a condition tend to resort to the standard decision: they choose the option that is easier or seems safer.

In fact, decision fatigue has been studied in other professions, such as medicine. A study published in 2019 found that general practitioners were more likely to recommend their patients a test for breast or colon cancer screening in the morning than in the evening. In the same year, scientists reported in the journal Health Economics that orthopedic surgeons decided less often to operate on a patient at the end of their shift than when they started work. And another study in 2014 observed that doctors were more likely to prescribe antibiotics at the end of their working day.

Another much discussed work comes from the judiciary: Israeli and US researchers in 2011 showed that judges more often decided in favor of suspects or prisoners on probation requests if the relevant cases were heard at the beginning of the day or after a meal break.

joe / dpa