A Psychological Investigation of Consumer Vulnerability to Fraud: Legal and Policy Implications‪.‬

INTRODUCTION Despite the high incidence of consumer fraud in the United States (1) and its dire consequences, especially in the home loan context, (2) very little research has been conducted on the psychological factors that leave consumers 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 reassurances and deceptive explanations of the problematic term. Such explanations can be effective even when the proffered explanation makes no sense. (4) As discussed in the legal and policy implications section of this article, the ability of salespeople to deceive consumers in this manner is particularly harmful because these techniques may not be actionable in some jurisdictions. (5)