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Coping with consumer fraud: the need for a paradigm shift.

For years law enforcement and consumer education practitioners have developed speaker programs, user guides, and other informational initiatives to help consumers avoid economic exploitation by criminal elements. (For recent examples, see Mott 1993; Schulte 1994; Shadel and John T. 1994; Whitlock 1994.) While these practitioner-launched undertakings are undoubtedly valuable to many consumers, it is the contention of this paper that they would be even more valuable if the advice they offered drew upon a larger and more diverse informational base.

In this paper an informational base commonly associated with consumer initiatives for avoiding victimization is described along with its limitations. Also described and illustrated with a detailed case study is a plan for enlarging the informational base to provide more useful behavioral guidelines for helping consumers avoid victimization.


The informational initiatives noted above, like most consumer guides for avoiding victimization by criminals, are often authored by practitioners with considerable professional experience dealing with criminal cases of consumer fraud. This experience typically takes the form of criminal investigations or prosecutions at federal, state, or local levels. The natural unit of description and analysis is often the individual police or agency report which describes in detail the particulars of an alleged act of fraud and its impact on the victim (e.g., financial losses incurred).

While such reports offer several advantages to the practitioner who hopes to help consumers avoid victimization (e.g., the reports provide a wealth of swindle particulars useful in informational and educational programs), the cases they consider are unlikely to be representative of seams at large. Many crimes go unreported. This is especially true of confidence swindles (Alston 1986). The victims who fail to report these crimes are often found to be naive individuals who do not know they have been swindled, and if they do, they do not know to whom to turn once a swindle has occurred (Blum 1972). For these various reasons, among others, available case studies may offer an unrepresentative picture of the population of actual confidence swindles.

A second weakness of case studies concerns their lack of information about critical incidents or stimuli that lead to consumer victimization (Fattah and Sacco 1989). It may be helpful to get an impression, albeit unrepresentative, of when and where swindles occur, but this general information is unlikely to be sufficient to help consumers ward off a swindle's sophisticated approach. It is not enough to provide a set of general background characteristics to be on guard against as this leads to many "false positives" being identified by consumers in that many individuals or circumstances that fit the swindle category also fit the non-swindle category.

What is especially needed to resolve such dilemmas is what behavioral theorists refer to as discriminative stimuli and responses, stimuli and responses whose presence is associated with a swindle situation and whose absence is associated with a non-swindle situation (Donahoe and Palmer 1994). In lay terms we should think of discriminative stimuli as danger signals and discriminative responses as escape mechanisms.

Unfortunately, analyses of case studies of swindles reveal few danger signals and escape mechanisms. This finding should come as no surprise because case studies typically found in police files have been placed there as a result of the failure of swindle victims to recognize and act upon discriminative stimuli.


To secure needed information on danger signals and escape mechanisms, it was decided that a new strategic approach was needed, one that focused on the coping behaviors of consumers who have been successful in dealing with the attempts of confidence swindlers to defraud them. As older Americans are often victimized by confidence swindles (Friedman 1992), it was also decided to focus on this population subgroup. The first step in implementing the new strategic approach consisted of placing public service announcements (PSAs) in various news media and newsletters regularly received by older Americans in an effort to identify such success stories. A primary source was the AARP Bulletin, the newsletter of the American Association of Retired Persons, which is distributed each month to the more than 30 million AARP members, all of whom are at least 50 years of age. These older Americans were asked by the PSAs to submit a short letter relating a personal story of a suspected confidence swindle directed at them that they managed to avoid; they were also asked to identify relevant danger signals and escape mechanisms.

As a next step, two surveys were undertaken. In the first (Phase One), telephone interviews were conducted with all the respondents who mailed in success stories and agreed to be interviewed (304). The interviews focused on the respondents' stories with special emphasis on the successful coping mechanisms.

Following the telephone interviews, Phase Two of the study was conducted. In this phase a mail questionnaire was sent to federal, state, and local government agencies, as well as private organizations, which help consumers deal with confidence swindles. The mail survey was undertaken to gather national materials dealing with individual confidence swindles disseminated by these organizations. Once the materials were received, they were content analyzed on a swindle-by-swindle basis to determine if the danger signals and escape mechanisms identified by the success story respondents in Phase One added anything new or different to the advice the agencies and organizations in Phase Two were offering to consumers in their nationally disseminated materials.(1)

Some of the principal findings of the study are

1. The success stories related by the 304 older respondents dealt with 24 common varieties of confidence swindles. As noted in Table 1, a wide spectrum of attempted swindles emerged from the respondents' 304 reports, ranging from the familiar (e.g., auto repair) to the exotic (e.g., Jamaican Switch). Table 1 also reveals that swindles relating to telephone sweepstakes, mail sweepstakes, and home improvement work accounted for about half of the 304 reports. The demographics of the older respondent sample indicated that they were mainly female (66 percent), married (54 percent), and well educated (36 percent were college graduates), with a median age of 69.5 years. Many of the swindles involved contacting the respondents at home, which may reflect the higher portion (74 percent) reporting being retired from the workplace.

2. In relating how they succeeded in avoiding victimization, respondents identified 26 different danger signals they recognized and 20 different escape mechanisms they pursued. These danger signals and escape mechanisms have been grouped by type in Tables 2 and 3, respectively. As already indicated, the number of danger signals (26) was somewhat larger than the number of escape mechanisms (20), perhaps reflecting the fact that almost all respondents reported only one escape mechanism while many respondents reported multiple danger signals.

3. In comparing what the respondents reported in Phase One with what was found in Phase Two in the nationally disseminated materials, it was determined that (a) many of the swindle varieties dealt with by the respondents were not pursued in the national materials and (b) in those instances in which the same varieties of swindles were dealt with by the respondents and the national materials, the specific danger signals and escape mechanisms identified by the respondents often were not mentioned in the national materials. The first point noted above derives from Table 1. This table reveals 11 varieties of swindles that were reported by the respondents in Phase One but not noted in the materials provided by the organizations contacted in Phase Two. Interestingly, the most commonly received Phase Two materials related to investment swindles (34), followed by swindles relating to donations (31), auto repair (28), sweepstakes-mail (23), and sweepstakes-telephone (19). Turning next to Table 4, we find evidence to support the second point noted above. The table compares the Phase One and Phase Two findings by focusing on data for a common set of 12 swindle types that were reported in the materials provided by both the sample of respondents (Phase One) and the sample of organizations surveyed (Phase Two). The comparison reveals major discrepancies between the Phase One percentage distributions of danger signals and escape mechanisms and their Phase Two counterparts.

4. The gaps that existed in the organizational materials relative to the respondent reports appeared to follow distinct patterns. With regard to danger signals reported in Table 4, the most interesting departure for the two distributions concerned "multiple aspects of the situation," a category which garnered 13.8 percent of the Phase One responses but only 1.0 percent of the Phase Two responses. The discrepancy suggests that danger signals dealing with multiple cues were rarely found in the organizational materials but much more commonly found in the respondent reports. Indeed, the organizational material tended to be structured logically, like a computer flow chart (e.g., if the caller does X, be suspicious). The respondents' reports, on the other hand, tended to be structured psychologically, with due appreciation of the cumulative impact of multiple indicators (e.g., "it wasn't any one thing; the whole situation just didn't seem right").

Commonly Used Swindles Reported by Respondents in Phase One

 Also Addressed in
 Phase Two Materials

Swindle Type Number Yes No

Sweepstakes-Phone 75 X
Sweepstakes-Mail 41 X
Home Improvements 31 X
Credit Cards 18 X
"Pigeon Drop" 18 X
Investments 17 X
Door-to-Door Sales 11 X
Phone Cards 11 X
Donations 8 X
Health Insurance 8 X
Tax Refunds 8 X
"Bank Examiner" 5 X
Time Share Offers 5 X
Auto Repairs 4 X
Lottery 4 X
Pyramid Schemes 4 X
Wills/Trusts 4 X
Collect Calls 3 X
"Jamaican Switch" 2 X
"Block Hustle" 2 X
Fortune Teller 2 X
Phony Serviceman 2 X
Social Security 2 X
Other 18



Similarly, the gaps revealed in the two distributions for escape mechanisms in Table 4 also point to important psychological differences between the organizations and respondents surveyed. Typically, the organization's advice, designed for everyone, had a cautious ring to it; the respondents' reports, on the other hand, provided an actual account of what highly educated (and presumable confident) older Americans did in response to a threat to their pocketbooks. Often, it seems, these elders threw caution to the wind. The most dramatic differences in Phase One and Phase Two responses reinforce this point. The Phase One and Phase Two responses to "Respondent refused offer for the moment" were 14.5 percent and 58.3 percent, respectively, while the corresponding figures for the tougher "Respondent refused offer categorically" were 48.8 and 20.2 percent, respectively.


What are we to make of the study findings? In particular, what are the implications for designers of informational and educational programs to help older Americans avoid victimization by confidence swindlers? And, more generally, what are the implications of the findings for designers of other consumer informational and educational programs?

At the outset it should be noted that the study is characterized by serious limitations of design and analysis (e.g., sample size and representativeness), which strongly suggest that its results be interpreted with caution. The study represents a first attempt to address on a national basis a vexing consumer problem not especially amenable to empirical research. At best, the findings should be seen as providing a suggestive rather than definitive picture of how elders cope successfully with the entreaties of confidence swindlers.

Three observations are suggested by the results, and they all derive from a fundamental finding relating to the study methodology: older consumers who have successfully confronted confidence swindlers are often able to provide the particulars of the episodes including the danger signals and escape methods they used to avoid victimization. The three observations are as follows:

1. The differences found for danger signals and escape methods identified by the older consumers and those noted in national materials on confidence swindles have implications for the designers of consumer informational materials and programs to help older Americans avoid victimization by confidence swindlers. The difference in focus for the two sets of data is perhaps most apparent with regard to danger signals. The advice given by the national materials concentrates on individual "red flags" with little attention to aggregations of such danger signals appearing over time. Relatively speaking, these aggregations were mentioned far more frequently by the older consumer-respondents who apparently grew suspicious as the swindler's stories unfolded with more and more questionable elements. The lesson to be learned from these finding is that the human ability to identify patterns of suspicious behavior, either in the form of multiple signals or in inconsistencies among these signals, needs to be recognized in national materials to inform consumers about the dangers of confidence swindles. With regard to escape mechanisms, the largest discrepancy between the national materials and the respondents' accounts of their behavior concerns the conservative advice offered by the materials and the less conservative actions reported by the consumer-respondents. Many designers of informational materials may be surprised to learn that most of the older respondents reacted forcefully to the overtures of the swindlers by declining to communicate with them or by refusing their offers categorically. The designers appear to prefer a less assertive and presumable less provocative response by consumers; in fact, the most commonly offered advice to consumers in the national materials was the relatively mild "refuse the offer for the moment." It should be noted that the respondents apparently felt safe in doing what they did. Perhaps the lesson here is for the designers of informational materials to acknowledge, on a case-by-case basis, what the risks might be in using various approaches to terminate contact with suspected swindlers. However, as some agency personnel have noted informally, there may be legal liability concerns associated with agency-produced material which strongly encourages agencies to suggest that consumers place themselves in positions which do not in any way jeopardize their safety; for this reason, agencies may have little choice but to offer highly conservative recommendations.

2. In light of the large numbers of swindle varieties that were not comprehensively treated in national materials, an effort should be made, perhaps by a national organization, to create, update, and distribute materials on an on-going basis relating to all major varieties of swindles. Many of the "non-comparable swindles" in Table 1 are in-person bunco scams (as compared to the currently more popular telephone and mail swindles), such as the Pigeon Drop, the Jamaican Switch, the Fortune Teller, the Bank Examiner, and some lottery swindles. It seems clear that these swindles are less commonly practiced today; however, according to the National Association of Bunco Investigators (1995), they still occur in significant numbers throughout the United States and are often responsible for major financial losses to consumers. With frequent changes now occurring to retail practices and technologies (especially with regard to the credit card and banking industries), it is crucial that existing swindle descriptions and advice be revised periodically to reflect changing circumstances.

3. In light of the success of the current study in securing usable information from consumer respondents as well as consumer agencies and organizations, an effort should be made to explore the possibility of employing the study's positive behavioral model approach to address other consumer problems. The paradigm for such efforts is some form of ongoing problem occasionally experienced by individuals or groups for whom help is available through educational and informational materials generated by government agencies and/or private organizations. The underlying assumption in using this approach is that the help usually provided for these problems by government agencies and/or private organizations is based not on "successes" but on "failures," with the materials designed to help prospective users avoid failure. This one-sided focus often simply reflects the fact that empirical information is not readily available on successes. Unfortunately, however, only partial, often anecdotal information is frequently available on failures, so the one-sided approach is likely to be even more flawed in practice. By contrast, the logic underlying the current paradigm is that individual success stories provide positive behavioral models for others to emulate, models which government agencies and private organizations can incorporate into their materials to educate and inform target individuals and groups. As we have seen, the methodological challenge here is one of identifying the success stories and securing the cooperation of their participants. This is no small challenge, but once it is accomplished, not one piece of advice is offered, but almost as many pieces as there are success stories to tell. The result is a whole consumer menu of danger signals to look for and escape mechanisms to pursue in order to avoid victimization. Moreover, the various choices on the menu derive not from "theory" or from failure stories, but from the successful efforts of actual consumers.

What major consumer problems might yield to this approach? Consumer complaint resolution is one possibility. Many consumers speak with pride about their success in securing redress of grievances relating to the purchase or use of such major commodities as automobiles and housing units, Other consumers complain bitterly of their inability to secure even a modicum of attention to their complaints. Might not the successful complainants provide positive behavioral models for the failures? This is a researchable question with important implications for the consumer interest.


This exploratory study has offered a preliminary examination of a positive-behavioral approach to an old and important problem confronting many American consumers. The study's most significant findings concern the gaps uncovered between the two sets of survey results, one yielded by older respondents and the other yielded by organizational materials.

It is believed that some agencies and organizations will be able to use the study results as a guide for revising existing informational materials and programs on confidence swindles, while others will find the results useful for creating new materials and programs to help consumers avoid being victimized by these crimes. These applications of the study findings will constitute a major advance over current informational and educational practices if the new materials succeed in better preparing older Americans to combat a very serious criminal threat to themselves and their families.


Danger Signals, by Category of Suspicion, Identified by Respondents

Characteristics of suspect/organization

* There was reason to believe suspect was not a local person.

* Appearance, presentation, and/or materials were inappropriate/unprofessional.

* Respondent was being asked to do business with someone he/she did not know or know to be reputable.

* Failed to disclose information about his/her firm and/or himself/herself.

* Name of suspect's firm sound suspiciously like that of a reputable organization.

Suspect's pre- and post-offer actions

* Claimed respondent was specially selected.

* Asked for information that he/she should have already known.

* Asked for personal information that should not be given out as it could be used against respondent.

* Despite suspect's claim about an earlier acceptance of offer by respondent, this had not occurred.

Suspect's manner of communication

* Talked very fast.

* Was "more friendly" than seemed appropriate given that be/she did not know respondent.

* Communication was very "high pressure" and/or intimidating.

* Seemed nervous.

* Reacted inappropriately when questioned.

Something about offer itself

* Sounded too good to be true.

* Suspect's request for money seemed inappropriate given supposed nature of contact.

* Made no sense from a consumer value (price/quality) perspective.

* Financial commitment was requested/required prior to receipt of service/product.

* Suspect said something that respondent knew/suspected was not true.

* Respondent had prior knowledge and/or experience with suspected swindle.

* Time pressure was exerted on respondent.

* Suspect said this was last chance to take advantage of offer.

Initial approach of respondent

* Method of contact (mail, phone, or in-person) seemed inappropriate for kind of offer being made.

Multiple aspects of situation

* Whole situation did not seem right.

* Inconsistencies emerged in suspect's story.


Escape Mechanisms, by Category of Exit, Used by Respondents

Respondent declined to communicate with suspect.

* Left scene.

* Did not respond to solicitation (mail only).

* Hung up (phone only).

Respondent refused offer for the moment.

* Said he/she had a prior engagement.

* Said be/she would think about offer and/or seek a second opinion.

* Asked suspect to provide written information pertaining to offer.

* Denied having financial means to accept offer.

* Declined offer temporarily so that he/she could have suspect checked out.

Respondent refused offer categorically.

* Refused to supply personal information (e.g., credit card number).

* Said he/she did not believe suspect's story.

* Refused to pay money/denied charges.

* Threatened to contact authorities.

* Refused after intensive questioning of suspect created doubts.

* Insulted suspect.

* Said he/she knew suspect's offer was a scam.

* Simply refused suspect's offer.

Respondent took steps to avoid losing money after suspicious offer/contact.

* Stopped payment/canceled order.

* Contacted authorities in order to have his/her money returned.

* Contacted authorities in order to alert them of illegal activities.

The author would like to thank Fred Morgeson and John Lazor for their help with the data collection and analysis phases of the project used to illustrate the principal points of this article. Thanks are also due to the AARP Andrus Foundation for providing a research gram that made it possible to complete the project. An earlier version of this article, which was presented at the 1997 meeting of the American Council on Consumer Interests, received ACCI's 1997 Applied Consumer Economics Award.

1 To briefly describe the procedures of the Phase Two study, 178 organizations were contacted and 148 (83 percent) responded. Of the 148 responding, 65 (44 percent) sent national materials, and 61 of the 65 (94 percent) sent national materials that related to the confidence swindles in the Phase One study. Of the 61 organizations, 38 (62 percent) sent one or two national handouts, 17 (28 percent) sent three to six national handouts, and the remaining six (ten percent) sent from seven to 25 national handouts.

The national materials received contained many duplicates as local and state consumer agencies often sent copies of handouts they had received from national organizations, such as the Federal Trade Commission. A total of 99 different national handouts was received relating to confidence swindles; of these, 50 dealt with swindles mentioned by Phase One respondents and the remaining 49 contained information related to other swindles.

The procedures used in Phase Two to identify swindle categories, as well as danger signals and escape mechanisms, were simple extensions of those employed in Phase One, with the difference being that the texts of handouts were analyzed in Phase Two instead of respondent-generated success stories. Two independent raters examined the Phase Two material and the inter-rater consistency was high with 92 percent agreement found for comparisons among swindle types, danger signals, and escape mechanisms.


Alston, L. A. (1986), Crime and Older Americans, Springfield, IL: Charles C. Thomas.

Blum, R. H. (1972), Deceivers and Deceived: Observations on Confidence Men and Their Victims, Informants and Their Quarry, Political and Industrial Spies and Ordinary Citizens, Springfield, IL: Charles C. Thomas.

Donahoe, J. and D. Palmer (1994), Learning and Complex Behavior, Needham Heights, MA: Allyn and Bacon.

Fattah, E. A. and V. F. Sacco (1989), Crime and Victimization of the Elderly, New York: Springer-Verlag.

Friedman, M. (1992), "Confidence Swindles of Older Consumers," The Journal of Consumer Affairs, 26(2): 20-46.

Mott, G. M. (1993), How to Recognize and A void Scams, Swindles, and Rip-Offs, Littleton, CO: Golden Shadows Press.

National Association of Bunco Investigators, Inc. (1995), Handbook of National Association of Bunco Investigators, Inc. (internal document available to association members through Baltimore Police Department, Baltimore, MD 21202).

Schulte, F. (1995), Fleeced! Amherst, NY: Prometheus Books.

Shadel, D. P. and John T. (1994), Schemes & Scams, North Hollywood, CA: Newcastle Publishing.

Whitlock, C. R. (1994), Easy Money, New York: Kensington Publishing.

Monroe Friedman is Professor, Psychology, Eastern Michigan University, Ypsilanti.
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Author:Friedman, Monroe
Publication:Journal of Consumer Affairs
Date:Jun 22, 1998
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