35 Law & Psychol. Rev. 61 (2011)
A Psychological Investigation of Consumer Vulnerability to Fraud: Legal and Policy Implication

handle is hein.journals/lpsyr35 and id is 63 raw text is: A PSYCHOLOGICAL INVESTIGATION OF CONSUMER
VULNERABILITY TO FRAUD:
LEGAL AND POLICY IMPLICATIONS
Jessica M. Choplin, Debra Pogrund Stark, & Jasmine N. Ahmad
INTRODUCTION
Despite the high incidence of consumer fraud in the United States' and
its dire consequences, especially in the home loan context,2 very little re-
search has been conducted on the psychological factors that leave consum-
ers vulnerable to fraud and deceptive sales practices. In particular, few
have tested different explanations for consumer vulnerability to various
types of fraud and to analyze the legal and policy implications in terms of
creating better laws to protect consumers.3 This article focuses on the
problem of consumer susceptibility to deception when a consumer notices
a problematic term in a contract but is persuaded to proceed with the deal.
To convince the consumer to proceed, sales representatives may use a
number of techniques, which include providing various types of reassur-
ances and deceptive explanations of the problematic term. Such explana-
*   Jessica M. Choplin is an Associate Professor of Experimental Psychology at DePaul Universi-
ty; Debra Pogrund Stark is a Professor of Law at The John Marshall Law School; Jasmine N. Abmad
is an MA student in the Department of Psychology, DePaul University. The authors thank Amber N.
Bloomfield for running the participants in Fraud Simulation Study 1.
1.   KEITH B. ANDERSON, FED. TRADE COMM'N, CONSUMER FRAUD IN THE UNITED STATES: AN
FTC SURVEY ES-2 (2004), available at http://www.ftc.gov/reports/consunerfraud/040805confraudrpt.pdf
(last visited Jul. 12, 2011).
2.   See, e.g., ELLEN SCHLOEMER ET AL., CENTER FOR RESPONSIBLE LENDING, LOSING
GROUND: FORECLOSURES IN THE SUBPRIME MARKET AND THEIR COST TO HOMEOWNERS 4-5 (2006),
available at http://www.responsiblelending.org/mortgage-lending/research-analysis/foreclosure-paper-
report-2-17.pdf (last visited Jul. 11, 2011).
3.   But see John E. Swan, Michael R. Bowers & Lynne D. Richardson, Customer Trust in the
Salesperson: An Integrative Review and Meta-Analysis of the Empirical Literature, 44 J. BUS. RES. 93
(1999) (providing a review of research on factors that cause consumers to trust salespeople); Debra
Pogrund Stark & Jessica M. Choplin, A License To Deceive: Enforcing Contractual Myths Despite
Consumer Psychological Realities, 5 N.Y.U. J.L. & BUS. 617 (2009) [hereinafter Stark & Choplin,
License to Deceive] (examining the extent to which consumers are vulnerable to fraud when they fail
to read carefully the terms of the contracts they enter); Debra Pogrund Stark & Jessica M. Choplin, A
Cognitive and Social Psychological Analysis of Disclosure Laws and Call for Mortgage Counseling to
Prevent Predatory Lending, 16 PSYCH. PUB. POL'Y & L.. 85 (2010) [hereinafter Stark & Choplin,
Psychological Analysis of Disclosure Laws] (In that article, we analyze the effectiveness of home loan
disclosure laws mandated by Congress to prevent predatory home loans by providing consumers with
the information necessary to shop around for the lowest cost and most affordable loan possible. In that
article, we provide a literature review of certain key cognitive and social psychological phenomena
that we hypothesized impede the ability of consumers to use these disclosures as Congress intended
and that contributed to so many consumers entering into overpriced and unaffordable home loans.).

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