The psychology of scams: Provoking and committing errors of judgment

Authors: Office of Fair Trading (prepared by University of Exeter School of Psychology)
Year: 2009

Relevance: We may make errors of judgment when we succumb to legitimate sales appeals. This work seeks to identify what particular errors lead to scam victimization.

    “[A] modest probability of falling for a scam is no longer an inexplicable exception to the general tendency of human choice, but rather an inevitable by-product of the processes that enable normal economic life to continue.” (p. 15)

Summary: This work includes an extensive literature review of scams (mass-marketed consumer frauds) and outlines four studies:

1. Extended interviews with scam victims

  • In addition to providing useful subjective feedback, these were also “text-mined” for psychological features that characterized victimization. For instance, most victims described perceived legitimacy and high reward in the scam ploy.

2. Text-mining scam communications

  • By categorizing the language of different scams, the researchers could identify key ploys typifying scams generally: appeals to trust/authority & visceral (vividly emotional) triggers referencing the future (“phantom fixation”).

3. Victim/Non-victim comparison – susceptibility to errors of judgments

  • “There was no evidence that any of the decision error propensities distinguished victims… from non-victims more effectively than others” (p. 121)
  • However, victims did report trying harder to understand scams than did non-victims. This counter-intuitive result may reflect non-victims reflex to discard promotional materials, rather than a careful attentiveness on the part of victims.

4. Scam simulation experiment – “hot” and “cold” conditions

  • By varying whether a mailed survey initially looked like a scam mailing (“hot” condition) or an innocuous mailing (“cold” condition), researchers were able to garner more direct feedback from people targeted by a “scam” – in this case from those who, by opening the mailing, had demonstrated interest in the ploy
  • Impact of $$: In the “cold” condition, respondents indicated that they would have been more likely to respond to the ploy when the prize was larger. In the “hot” condition, however, the manipulation cues were most critical.
  • The differences between conditions suggest that in-the-moment feedback may be particularly important when studying fraud and its victims.

First Paragraph: According to the Office of Fair Trading (2006), 3.2 million adults in the UK fall victim to mass marketed scams every year, and collectively lose £3.5 billion. Victims of scams are often labelled as ‘greedy’ or ‘gullible’ and elicit the reaction, ‘How on earth could anyone fall for that?’ However, such labels are unhelpful and superficial generalisations that presume all of us are perfectly rational consumers, ignoring the fact that all of us are vulnerable to a persuasive approach at one time or another. Clearly, responding to a scam is an error of judgement – so our research sought to identify the main categories of decision error that typify victim responses, and to understand the psychology of persuasion employed by scammers to try to provoke such errors.

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The Psychology of Consumer Fraud

Authors: Doug Shadel & Karla Pak

Publication: Doctoral Thesis

Year: 2007

Summary: This work provides a literature review of social influence (as it relates to consumer fraud) and consumer fraud victimization (including fraud’s prevalence, fraud types, and typical victim profiles).

It also introduces an undercover taping project identifying various persuasion strategies used by conmen.

  • Of 1,112 influence tactics coded across 128 transcripts, the most commonly-used tactic was “Phantom Fixation,” with 249 instances (p. 66). See page 67 for a chart of influence tactics by scam type.

The work also describes a series of fraud victim profiling studies, comparing known victims of fraud to non-victims. In so doing, it seeks to identify factors that predict victimization in two different types of fraud, while circumventing the problem of victim-denial.

  • Investment fraud victims are more likely to be financially literate, married, male, have a college degree or more, earn $35,000 per year or more, and are more open to persuasive appeals (p.157).
  • Lottery fraud victims are more likely to be female, widowed, living alone, earn less than $30,000 per year, be less financially literate, and “live for today” (p. 158)

The survey also found that many known victims were unwilling to acknowledge their victimization:

  • When asked simply, only 10-20% of investment victims and 14-56% of lottery victims would acknowledge having been defrauded, with the rate depending on the question phrasing (p. 150).
  • The secondary study of just investment victims was able to attain 62% acknowledgement using a series of progressive, investment-specific questions (p. 150).

The survey included 80 known lottery fraud victims, 80 investment fraud victims (9 self-identified), and 160 general population (self-identified as non-victims).

Author Abstract: This study was a three-part inquiry of consumer fraud. In part 1, undercover tapes of fraud pitches were analyzed to determine how con men pitch their victims. 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. In part 2, a 72 question survey was administered to 80 victims of lottery fraud, 80 victims of investment fraud and 160 non-victims of fraud. 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 underreport fraud. In part 3, a 2nd survey was administered to a different population of 125 investment fraud victims and 258 non-victims to determine if findings from survey 1 could be replicated. In fact, major findings relating to financial literacy were replicated, as were demographic, psychological and behavioral characteristics of investment fraud victims. In addition, new findings relating to “persuasion literacy” were found: victims of investment fraud were less able to identify pitch lines used by con men in fraud schemes than a non-victim population. This suggests that a key strategy for deterring fraud victimization in the future might be to teach both financial literacy and persuasion literacy to investors.

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Decreasing Resistance by Affirming the Self

Authors: Julia Zuwerink Jacks (Greensboro—North Carolina) & Maureen e. O’Brien (Louisiana State University at Alexandria)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Prevention

Relevance: The ability to facilitate acceptance of safe behavior and increase resistance towards dangerous behavior is an important opportunity for fraud prevention professionals.

Summary: This chapter outlines a series of studies examining the relationship between self-affirmation and susceptibility to persuasion.

  • Self-affirmed individuals are more likely to process a persuasive message in an open-minded fashion.  By reinforcing the target’s positive self-perception, the persuasive message is perceived as less threatening, making resistance less necessary.
  • The extent of a person’s susceptibility depends on the relationship between the attribute being affirmed (e.g., independence, cooperation) and the persuasive message.
  • The persuasive power of self-affirmation is only effective if the affirmation is unrelated to the persuasive message, or if the self-affirmation is compatible with the message (e.g., “you are so supportive” and “would you mind driving me to the bank?”).
  • If the self-affirmation is incompatible (e.g. reinforcing a person’s sensible caution and then asking the person to behave recklessly) then resistance increases.

Bolstering potential fraud victims’ perceptions of their own careful deliberation and sensible caution may increase resistance to a fraudster’s ploy of the quick sale, regardless of the specific fraud type.

Author Abstract: “You’re the coolest person I’ve ever met,” she said to Heather. They were drinking sweet tea on the patio and staring into the fishpond, both tired from a long day of classes. Heather wasn’t sure where her friend was going with this, but of course she didn’t mind the flattery. “I mean, of all the friends I’ve met in college you’ve got to be the nicest,” continued Jen. “You’re warm, caring, honest. Like, who else would have run after that man to give him the $20 he dropped? I would have kept it. I mean, like he wasn’t even good looking! What else have you done like that? It’s so . . . it’s so honest!”

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Social Influence: Compliance and Comformity

Authors: Robert B. Cialdini & Noah J. Goldstein, Arizona State University

Publication: Annual Review of Psychology

Year: 2004

Focus Area: Persuasion, Decision Making

Relevance: Understanding what makes an individual more likely to comply with a request may help explain how fraud is achieved.

Summary: This article offers a review of the recent literature in compliance and conformity, a branch of persuasion research.  The themes of compliance and conformity are outlined around three central motivations that, together, help determine whether a person accepts or resists an outside persuasion influence:

  • Accuracy: the desire to achieve one’s goals effectively requires an accurate perception of reality – one misperception may be “the difference between getting a bargain and being duped” (p. 592).  An influence that appears reasonable and informs one’s thinking in a valuable way is more likely to be accepted, a tendency that can be influenced by distraction, authority appeals, and reframing.
  • Affiliation: the desire to be part of a meaningful social group.  A request emanating from a favored person or group, or that draws upon favored group identification, is more likely to be granted.  This tendency can be manipulated using flattery, reciprocation, and similarity appeals.
  • Maintenance of a positive self-conception: the desire to preserve a positive image of oneself.  A request framed to contribute to a person’s self-image is more likely to be granted.  This desire can be manipulated through appeals to consistency, public commitment, and follow-up techniques.

Author Abstract: This review covers recent developments in the social influence literature, focusing primarily on compliance and conformity research published between 1997 and 2002. The principles and processes underlying a target’s susceptibility to outside influences are considered in light of three goals fundamental to rewarding human functioning. Specifically, targets are motivated to form accurate perceptions of reality and react accordingly, to develop and preserve meaningful social relationships, and to maintain a favorable self-concept. Consistent with the current movement in compliance and conformity research, this review emphasizes the ways in which these goals interact with external forces to engender social influence processes that are subtle, indirect, and outside of awareness.

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Resistance and Persuasion

Editors: Eric S. Knowles (University of Arkansas) & Jay A. Linn (Widener University)

Publication: Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Prevention

Relevance: Understanding the properties of resistance puts one in a much stronger position to change another’s level of resistance – either to diminish or bolster it.

Summary: “This book explores persuasion by considering its antithesis: resistance” (p. 3).  This edited collection defines, dissects, understands, and explains the role of resistance as one half of a persuasive interaction.  Resistance can be expressed variously as: reactance, distrust, scrutiny, and inertia.

The book distinguishes “Alpha” from “Omega” strategies of persuasion – increasing the appeal of a change vs. reducing resistance towards a change – and identifies 7 strategies for managing resistance:

  1. pushing a decision into the future
  2. using narratives/stories to sidestep resistance
  3. warning a target of upcoming persuasion
  4. emphasizing positive thoughts about the message
  5. reinforcing the target’s self-esteem or self-image
  6. training people to identify illegitimate messages
  7. using resistance against itself

Identifying the processes that lead to a certain person’s perspective can indicate which methods would be most effective to overcome or reinforce that viewpoint.  The final chapter also provides a useful integration of information and points towards further areas of research.

Author Abstract: Do we need to convince you that persuasion is an important topic for the social sciences? Probably not. You know that humans are social beings. Our communication, psychology, social organization, political structures, market choices—in short, everything we do—is interpersonally coordinated. Persuasion is one of the important tools to achieve these alliances.

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Creating Critical Consumers: Motivating Receptivity by Teaching Resistance

Authors: Brad J. Sagarin (Norther Illinois University), Robert B. Cialdini (Arizona State University)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Prevention, Persuasion, Resistance, Consumer Behavior, Decision Making

Relevance: Effective fraud prevention depends in part upon reducing the public’s susceptibility to the tactics of fraudsters, while facilitating their preference for legitimate information sources.

Summary: This chapter outlines a series of experiments seeking to improve consumers’ decision making by teaching them to reject illegitimate and prefer legitimate persuasion methods.  In order to accomplish this, they discovered that individuals must:

  1. Appreciate their own vulnerability: Many people do not believe that they personally are vulnerable, and so do not internalize warnings or feel motivated to learn.  This awareness can be achieved by exposing them to controlled examples of their own susceptibility.
  2. Know how to identify legitimate vs. illegitimate messages: A basic distinction can be identified, such as the validity of an authority endorsing a product (e.g., the Surgeon General vs. an actor who plays a doctor on television when discussing a medical product).  This provides a substitute “rule-of-thumb” to use in decision making instead of simply “someone who looks like an authority.”

Not only are subjects exposed to this progression of training more likely to resist persuasive messages from illegitimate sources, but they show a clear preference for messages endorsed by legitimate authorities.

Teaching individuals to accept legitimate persuasion may in fact be easier than teaching them to resist illegitimate messages.  Given limited mental processing capacity, easy rules that guide acceptance are more likely to be used than the draining task of careful resistance.

Author Abstract: Consumers have a paradoxical relationship with advertising. To our great personal detriment, we routinely resist health-related warnings from legitimate authorities such as the Surgeon General. At the same time, we readily accept advice from illegitimate authorities, even those who begin their appeal by admitting that “I’m not a doctor, but I play one on TV.” This chapter describes three studies designed to tackle the latter problem—maladaptive gullibility. However, it turns out that that the former problem—misplaced skepticism— proved far easier to solve.

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Looking Ahead as a Technique to Reduce Resistance

Authors: Steven J. Sherman (Indiana University—Bloomington), Matthew T. Crawford (University of Bristol, England), & Allen R. McConnell (Miami University, Oxford, Ohio)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Prevention, Resistance

Relevance: Successful fraud prevention depends on understanding both how victims are persuaded, and how to persuade victims to resist future ploys.  Manipulating a person’s perception of the future may be used to either increase or decrease a potential victim’s vulnerability.

Summary: Fear of regret is a primary source of motivation when a person thinks about the future.  One can use a person’s tendency to think about the future and fear regret as a persuasion method in a number of ways, including:

  • What if I’m wrong?: People are more likely to follow the advice of someone else when they think about the consequences of making a wrong decision.  This fear of regret reduces trust in their own judgment.
  • Scarcity: Scarcity increases the fear of missing out on something valuable, increasing motivation and persuasion.
  • Hypothetically-speaking:  Rather than requesting something directly (“Will you do x?”), it is more effective to first ask if the target would be willing to comply if the request was made (“Would you do x?”).  People are more likely to agree to a hypothetical, and will later tend to act in accordance with their earlier statement.
    • E.g. Simply asking subjects to volunteer for a charity received 2% compliance.  Asking if they would comply if asked yielded 40% compliance.  When the subjects were phoned weeks later and asked if they would volunteer, 38% complied – a 36% increase.
  • Easy futures: Given that people tend to underestimate the difficulty of carrying out a request when the event is far in the future, people are more likely to agree to requests of all types if they do not require immediate action.

In order to encourage compliance for a long-term request, it is better to focus on abstract motivators, such as desirability (positive) or moral repercussions (negative).  When seeking short-term compliance, concrete or “low-level” factors are more convincing, such as ease (positive) or high cost (negative).

Author Abstract: Social influence always involves resistance on the part of the target of influence. Regardless of the pressures toward acceptance of the influence, there is always a countervailing force in the form of resistance that reduces the likelihood of persuasion being effective. Successful influence, then, will be achieved only when the forces toward acceptance are greater than the forces stemming from resistance. As Knowles and Linn (this volume) so aptly point out, bringing about a situation where the forces toward acceptance are greater than the forces toward resistance can be achieved either by increasing the positive forces for persuasion or by decreasing the resistance that prevents persuasion.

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Narrative Persuasion and Overcoming Resistance

Authors: Sonya Dal Cin, Mark P. Zanna, & Geoffrey T. Fong (University of Waterloo)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Resistance, Prevention

Relevance: Fraud prevention efforts struggle to convince potential victims of their own vulnerability, of the prevalence of fraud, and of the magnetic appeal of many fraudsters.  These messages might be more effectively received if they were presented in a narrative, or story format.

Summary: Narratives are particularly effective for overcoming strong resistance for a number of reasons, including:

  1. People don’t expect to be influenced by a tale, and so don’t summon the same degree of resistance.
  2. Given that narratives inspire careful attention, targeted messages are attended to that might otherwise be ignored.  People generally avoid information that is incongruous with their existing attitudes (e.g., Sweeney & Gruber, 1984), but narratives convey a message “under the radar.”
  3. Arguing against the “real” experience of someone in a story is more difficult than arguing against a hypothetical situation.  While fictional stories may not be true, if they appear plausible then they may still carry the same persuasive impact.
  4. Beliefs can be presented implicitly in a story, as opposed to being stated explicitly in an argument.  With no specific arguments to resist, the beliefs are more difficult to oppose.
  5. When people are cognitively and emotionally invested in a story, they are left with less ability (mental resources) or motivation to resist the targeted message.
  6. As people are more inclined to accept information from someone they like and feel kinship with, stories can present messages from likable characters with whom people can relate. (For example, the Office of National Drug Control Policy (ONDCP) negotiated with television networks to include anti-drug story lines in popular series (Forbes, 2000).  The opportunities for message placement are substantial.

Author Abstract: Narratives are ubiquitous. Consider the vast numbers of people who are consuming stories at any given time. Casual observation of rush-hour passengers on the subway in Toronto (and we imagine those in Chicago, New York, and Paris) reveals a large number of commuters reading newspapers, magazines, and novels. At the same time, commuters driving the city’s major highways are listening to the radio—hearing stories about what is happening in the world. Children in day care and at school spend part of the day reading (or being read) stories, selected as age-appropriate and noncontroversial in their content, lest impressionable youth be led astray. Meanwhile, adults at home avidly tune in to soap operas. After school and after work, millions of people around the world switch on the television, expecting to be entertained by dramas, comedies, and “reality” television.

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Forewarnings of Influence Appeals: Inducing Resistance and Acceptance

Authors: Jeffrey M. Quinn & Wendy Wood (Texas A&M University)

Publication: Resistance and Persuasion. Ed. Eric S. Knowles & Jay A. Linn. Lawrence Erlbaum Associates, Publishers

Year: 2004

Focus Area: Persuasion, Resistance, Prevention

Relevance: Fraud prevention interventions frequently depend on forewarning individuals of persuasive dangers.  This chapter details how those warnings can influence a person either towards increased vigilance or towards increased susceptibility, depending on the context and manner of delivery.

Summary: Warnings may or may not create greater resistance, depending on the context and the information provided.

In order to maximize a person’s resistance, practitioners’ warnings should:

  1. Point out the possible threat to the person’s attitude.
  2. Not jeopardize the person’s self-image.
  3. Encourage thinking about specific aspects of the issue, including the potential repercussions of the threatening message.
  4. Be delivered free of distractions.

On the other hand, a forewarning may increase susceptibility if emphasis is placed on a person’s gullibility.  If recipients are concerned about losing face, they may preemptively agree with the persuasive appeal in order to minimize the later change (e.g., “It’s not persuasion if I agreed already!”).

Author Abstract: According to conventional wisdom, “forewarned is forearmed.” That is, warning of an impending request allows people to prepare for it and ultimately to resist it. For instance, advance knowledge that a telemarketer is about to call and deliver an unwanted sales pitch or that a friend is about to ask a burdensome favor should allow the target of such appeals to mount a successful defense. The idea that warnings generate resistance also is evident in reviews of persuasion research, which typically discuss forewarning effects along with other resistance techniques (e.g., Eagly & Chaiken, 1993). The assumption that warnings yield resistance can also explain a common practice in psychology experiments on attitude change. Experimenters often avoid warning participants of an impending persuasive communication, presumably to maximize participants’ susceptibility to persuasion (Papageorgis, 1967, 1968).

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Investor Fraud Study: Final Report

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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