2003 Consumer Experience Survey: Insights on consumer credit behavior, fraud, and financial planning

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Author & Publishing: AARP

Year: 2003

Focus Area: Prevalence, Profile

Relevance: The rate and financial impact of fraud in the U.S. remains unclear, and survey studies such as this provide a useful window into the experiences of consumers.  By focusing on those 45+, this survey targets those with greater wealth and, potentially, more to lose.

Summary: This report examines the consumer behavior of adults age 45 and over.  It includes a measure of “bad experience with products or services,” which is identified as fraud or non-fraud.  Key findings include:

  • About 4 in 10 consumers reported ever having a bad buying experience when buying a product or service.
  • The percentage of consumers reporting a “bad experience” has increased significantly in recent years.  For instance, those reporting not receiving a product or service in the promised time increased 12% from 1999 to 2003.

Of those reporting a “bad experience,” 37% defined the experience as a major swindle or fraud.

  • Approximately 3.75% of the 45+ sample surveyed reported having been the victim of a fraud.
  • Approximately 2% of respondents reported that a given fraud cost them more than $1000.
  • The most frequent types of fraud reported by victims were: faulty car sale, false advertisement, company of purchase went out of business, and house contractor fraud.
  • African-Americans and 30% more likely than the general population and 45% more likely than Hispanics to indicate that a swindle or fraud cost them more than $1000.

Author Abstract: The 2003 Consumer Experiences Survey is the fourth survey in a series of periodic studies conducted in the past 10 years. The three previous surveys of consumer behavior were conducted in 1993, 1999, and 2000. 1 The current study examined many of the same topics from the past three studies including buying experiences with products and services, knowledge about investment terms, and experience with major fraud or swindles. However, other pertinent issues have been added to the current study including privacy and identity theft, and predatory mortgage lending.

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Investor Fraud Study: Final Report

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Authors: The Consumer Fraud Research Group, for NASD Investor Education Foundation

Year: 2006

Focus Area: Persuasion, Profile

Relevance: Successfully preventing fraud depends on both understanding the techniques of fraudsters and identifying who is vulnerable to which types of fraud.

Summary: This study examines the characteristics of different types of victims and fraudsters’ tactics by  reviewing transcripts of fraud pitches and conducting interviews and phone surveys of lottery and investment fraud victims (165) and non-victims (150).

Fraud tactics:

  • source credibility (claiming to be from a legitimate business),
  • phantom fixation (tantalizing with wealth and riches), and
  • social consensus (claiming others are already investing successfully), along with many other methods from fear to friendship, tailored to any given audience.

Victim profiles:

  • Investment fraud victims were more often married men with higher educations and incomes, and with greater financial literacy than non-victims.
  • Lottery fraud victims were more often widowed women over 75, living alone and with strong religious feeling.  They were also more likely to feel that they “have not gotten what they deserve out of life” and “should live for the moment.”
  • Both investment and lottery victims were more likely to have experienced more difficulties and negative life events, relied on their own judgment rather than a professional’s opinion, were more open to sales pitches, and demonstrated “low persuasion literacy.”

Author Abstract: A multifaceted inquiry of consumer fraud analyzed undercover tapes of fraud pitches and surveyed victims and non-victims to determine how they differ. Tape analysis revealed con criminals customize their pitch to match the psychological profile of the victim and use a complex combination of influence tactics within each pitch to persuade. Investment fraud victims demonstrated a better understanding of basic financial literacy than non-victims. Both investment and lottery victims were more likely to have experienced a negative life event unrelated to their fraud experience. Both victim types were more likely to listen to sales pitches from unknown sales persons. Investment and lottery fraud victims both dramatically under-report fraud. It is recommended that 1) Financial literacy and fraud prevention efforts be broadened to incorporate greater emphasis on spotting and resisting con criminals’ persuasive tactics; 2) Encourage more reporting of illegal activity to law enforcement and 3) Conduct more research to develop a vulnerability index and test the effects of persuasion education as a deterrent to fraud.

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