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| DollarWise | Old scams keep finding new suckers
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There's a reason the same cons reappear year after year: They use time-tested ways of pushing just the right buttons to make us give up our cash or personal information.
By Jennifer Mulrean
Every year, the Federal Trade Commission's Consumer Sentinel issues a report on the top scams of the year, based on the number of complaints filed to watchdog organizations like the FTC and the National Consumer's League. What's startling about these lists isn't the volume of complaints -- more than 635,000 filed in 2004 -- or the dollar value of reported losses -- $547 million last year.
What's perplexing is how little the list changes each year.
Among online frauds, Internet auctions have topped the Consumer Sentinel list every year, followed by online shopping/catalog sales, Internet-access scams, foreign money offers and variations of the same old same old. A fraud may move around on the list the Nigerian scam was No. 5 among Internet scams in 2003 and No. 4 last year. But the status quo seems to prevail year after year.
Sure, new technology makes new scams possible, but in general, con artists aren't that creative. They don't have to be. The same tricks work over and over again. Why?
Anatomy of a scam
Doug Shadel, the AARP's Washington state director, and Anthony Pratkanis, a social psychology professor at the University of California, Santa Cruz, have been studying cons' pitches through more than 600 telephone conversations taped by the FBI. (Consumers who were being targeted had their calls forwarded to investigators, who then posed as the victims.)
The two, who are writing a consumer guidebook due in June, transcribed 325 of those tapes and identified 15 common strategies used by the con artists. Learn to recognize these "social influence" tactics and you can better your odds for stopping a fraud in its tracks.
There are usually four steps to pulling off a scam, says Pratkanis:- The cons lure you with something tempting.
- They gain your trust.
- They sweeten the pot to make you really consider biting.
- They close the deal.
To do so, they employ any number of strategies at each step. "The pitches are social-influence cocktails, just jam-packed with one tactic after another," says Pratkanis.| The top frauds of the year | The Consumer Sentinel's list of top frauds represents more than 635,000 complaints filed to watchdogs like the FTC and the National Consumer's League. The Sentinel doesn't track complaints by person, or even determine if each complaint represents someone who actually lost money to the scam. So it's hard to know if the same people are repeatedly falling for the schemes, or if they're being proactive about alerting the authorities.
Still, the lists have been fairly stable for years now. Identity theft has reigned at No. 1 for the last five years, and Internet auctions have dominated Internet-related frauds since the Sentinel began breaking those out from its general report a few years ago.
One interesting note: The broad complaint categories may mask newer schemes, such as phishing, that take advantage of technology to steal personal information, says Betsy Broder, the FTC's assistant director for planning and information. "As a subset in each category, we're seeing some attempt of data theft," she says.
This means consumers may be reporting one type of fraud -- say, a business opportunity that didn't pan out as promised-- when they're actually a victim of another.
"Sometimes victims never connect the new accounts opened in their name with the initial fraud," such as an ad they answered for a job, Broder says.
Consumer Sentinel's top 10 consumer complaints in 2004:- Identity theft (39%)
- Internet auctions (16%)
- Shop-at-home/catalog sales (8%)
- Internet services and computer complaints (6%)
- Foreign money offers (6%)
- Prizes/sweepstakes and lotteries (5%)
- Advance-fee loans and credit protection (3%)
- Business opportunities and work-at-home plans (2%)
- Telephone services (2%)
- Other (miscellaneous) 12%
Consumer Sentinel's top Internet-related scams for 2004:- Internet auctions (48%)
- Shop-at-home/catalog sales (17%)
- Internet-access services (10%)
- Foreign money offers (6%)
- Internet info and adult services (3%)
- Computers: Equipment and software (2%)
- Business opportunities and work-at-home plans (2%)
(The remainder of Net-related complaint categories each comprised 1% or less.) |
To lure you in initially, the scammers will generally use "phantom fixation" -- the promise of something tantalizing that never materializes. The Nigerian scam is a great example of this. In exchange for the use of your bank account to move funds out of another country, you're told you'll receive millions of dollars. People become so distracted by the notion of instant wealth that they're willing to throw their usual caution to the wind. The scam is closed when people fork over money for "incidental fees" to move the money to their account or divulge private bank account information that can be used to move money out of the account.
"(Victims) are not thinking logically because they're so obsessed with getting the money," says Shadel.
For step 2, gaining your trust, scammers will often use what Shadel and Pratkanis call the "command of authority" and the premise that your help is direly needed. Again, the Nigerian scam utilizes both of these: The scam is in the form of a personal plea for help, often from a supposed former high-ranking official from a foreign government. The official-sounding titles and ranks sprinkled throughout are meant to wrap a cloak of legitimacy around the plea.
And the plea for help is more than an appeal to your conscience, Shadel says. It's meant to mistakenly give you the feeling that you're in control of the situation and can walk away at any time. Other tactics used to gain your trust include friendly persuasion, which is just what it sounds like, and the "expert snare," where the con artist tries to make you feel like an expert who should be able to recognize a great opportunity when you see one.
Sweetening the scam
Making a scam appear too good to pass up is critical. There are five tactics generally used here:- Creating the landscape: A scammer will try to limit your use of outside information to investigate the scam. Some victims are told they're being given a secret opportunity that would be jeopardized if others found out. With Internet scams, there is often ample opportunity to investigate them before taking the bait. But as Barbara Mikkelson, who runs the hoax- and myth-busting site Snopes.com, points out, it's sometimes easier said than done. With the foreign money offers, so many of the names and stories change that unless you know you're looking for information on the "Nigerian scam," it can be difficult to track down the real story. (She says this old scheme still generates more mail to her site than any other financially related scam.)
- Comparison: One example is when an old price is scratched out and a new one is listed so that you can clearly see the "deal" you're getting.
- Social proof: A scammer will try to make it sound as if lots of people have already benefited from this scheme, so that you might think, "If everyone is doing it, it must be good."
- Self-generated persuasion: Arguably a softer sell than some of the other tactics, the perpetrator plants an idea but lets you use your own imagination to fill in the gaps. Pratkanis notes one scammer who said he wanted the victim to picture everything he might do with a large sum of money -- and would contact him in a week to hear the ideas. A week was plenty of time for the potential of all that money to really take hold of the victim's imagination.
- Scarcity: "When something is made scarce, it triggers three processes," Pratkanis says. "1) In our head, we think, if it's rare it must be valuable; 2) it creates panic 'if I don't get it now I may never get it'; and 3) it makes you special (for owning it)." Shadel cites the example of gold coins that aren't worth what they're sold for as one scam that takes advantage of this tactic.
Closing the deal
By the time a scammer is ready to close the deal, he may try to take advantage of the norm of reciprocity. This is the notion that if I've done something for you, you should do something for me, Shadel says. The con artist may have given you something of perceived value or done something for you in order to create a feeling of obligation. Pratkanis relates a tale where a scammer found out his potential victim was also being played by another con artist. He reported the other guy to the police and took credit for the good deed with the victim only to later defraud her himself.
Other strategies for closing the deal include:- A door-in-the-face: This is when a scammer proposes something farfetched, such as sending them a large sum of money, which causes you to turn them down. The scammer will then approach with a much smaller request you're more likely to grant.
- Reverse psychology: Instead of pressuring you, Shadel says, the con might say something like "it's completely up to you what you want to do" or "I wouldn't blame you at all if you wanted to just say no. A lot of people have trouble with making a lot of money." These appeals work because they don't appear to limit your freedom, and they tap into the tendency to do the opposite of what is asked.
- Commitment and consistency: With this strategy, a con will ask for a seemingly easy "commitment" up front. It may feel like no more than agreeing with a statement like "You want to make money, don't you?" But when you later try to bail on the deal at hand, the con will bring up your earlier commitment to make you feel you're caught being inconsistent.
If you're still not biting, the scammer may resort to fear and intimidation. Used all too frequently, according to Shadel, this can take the form of personal insults and sky-is-falling threats.
Why they work
All of these tactics are meant to put the consumer in a specific role, says Pratkanis. And because the con is orchestrating the role you're in, he has tremendous control over the outcome.
These strategies also tend to be successful because we're used to seeing many legitimate businesses use them. "Sales people have known about these tactics for a long time," says Shadel. When McDonald's advertises the number of burgers served, it's using social proof. Click on a cable home-shopping TV channel and you'll see many tactics at work simultaneously, notably scarcity, social proof and comparison. The difference with scammers, though, is that they'll often take things to an ugly level, using fear and outright deception to get you to cave.
And finally, most people are looking for easy ways to make decisions, Shadel says. "The (social-influence tactics) exploit our very human tendency to want to take decision-making shortcuts by blindly complying to habits, patterns and cultural norms. The con is counting on such compliance."
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