Excerpted with permission of the publisher John Wiley & Sons, Inc., (www.wiley.com), Outsmarting the Scam Artists: How to Protect Yourself From the Most Clever Cons by Doug Shadel, copyright 2012 by AARP.
Numerous studies have been conducted that compare the behavior and demographic characteristics of known fraud victims with the behavior and demographic characteristics of the general public to see how victims differ. While this research continues, there are several general conclusions that can be asserted about all victims.
See also: How the Consumer Financial Protection Bureau will protect you.
In looking at all victims of consumer fraud, there are essentially six primary risk factors that make one vulnerable to fraud:
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Exposure to Sales Situations: Multiple studies have shown that, compared to the general public, more victims of fraud tend to put themselves in sales situations. AARP’s National Victim Profiling study included interviews with 723 fraud victims and 1,509 individuals from the general public. The data from this study showed that compared to the general public, more victims sent away for free promotional materials, entered drawings, attended free lunch seminars, and read all mail, including advertisements.
During the course of numerous in-depth interviews with victims of various frauds, this pattern of exposing themselves to the marketplace was evident. Whether the motivation to do so was financial gain, getting a good deal, boredom, or just an enjoyable hobby, victims were more engaged in the marketplace than others were. This finding was true even when controlling for age and income.
Interest in Persuasion: Several years ago, researchers analyzed hundreds of undercover fraud tapes made by law enforcement and found that across all scams, a series of identifiable persuasion tactics were common to most fraud schemes. The most common tactics were phantom riches (you’ll make a lot of money), source credibility (you can trust me), social consensus (everyone is doing it), scarcity (hurry, time is running out), comparison (you’re getting a really good deal), and friendship (do this for me as your friend).
More recent studies have taken these same persuasion statements and asked victims and the general public to describe their interest in them. Consistently, the victims of fraud showed more interest in persuasion statements used by con artists than the general public, even after having been victimized. Researchers believe this interest makes investors and consumers highly vulnerable to fraud.
Lack of Prevention: The research has not only found that victims expose themselves to sales situations and are more interested in persuasion statements used by con artists, but they also take fewer affirmative steps to actively avoid being defrauded. Several studies have shown that victims are less likely to be signed up for the Do Not Call list that limits sales calls and they are less likely to check references of a business before buying from that business.
Risk-Taking: Researchers have found that the willingness to take risks is correlated with fraud victimization. Studies of investment-fraud victims in particular have shown that more known victims had previously invested in risky investment instruments like oil-and-gas options, penny stocks, and gold coins than the general public had.
Victims also report that they simply prefer taking greater risks to get greater returns than the general public does. This correlation makes sense given that any fraudulent offer to invest will have characteristics of higher-risk offers that may be legitimate: higher-than-market returns, often not regulated by the government, an opportunity that requires a quick decision, and so on.
Low Self-Control: One of the most well-established theories in criminology is the correlation between low self-control and criminal behavior. People who commit crimes tend to have lower self-control than those who do not commit crimes. But newer research has explored whether crime victims and specifically fraud victims also tend to have less self-control than the general public. Preliminary research points in the direction that lower self-control correlates to exposure to fraud offers and may even correlate to victimization itself. More research needs to be done in this area, but the preliminary findings are promising.
The idea that victims of fraud would have lower self-control than the general public makes sense. After all, remember that the con artist’s primary strategy is to get the victim into a heightened emotional state so he or she will make a buying decision based on emotion and not facts. It stands to reason, then, that those who are prone to making impulsive decisions would be more likely to succumb to the con artist’s ether and become a victim.
Age: One of the most hotly debated questions in the fraud research world is whether older people are disproportionately victimized compared to younger people. While there have been a number of studies that suggest older people are not disproportionately victimized, other studies showed the average fraud victim’s age to be between 54 and 69 years old. Because researchers will never be able to randomly select from among the total universe of victims, we will likely never know for sure if older people are victimized more than young people. But since 2004, the FINRA Investor Education Foundation and AARP have conducted extensive interviews with more than 1,700 fraud victims (chosen based on the availability of lists, not age) and the vast majority of them were more than 50 years old, which tells us something about age as a vulnerability factor. And one simple explanation for this could be the answer famous bank robber Willie Sutton gave when asked why he robs banks: “That’s where the money is.” Individuals over age 50 control trillions of dollars in assets, and the scammers are acutely aware of this fact.
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