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Unpublished Paper
“A Psychological Investigation of Consumer Vulnerability to Fraud: Legal and Policy Implications”
ExpressO (2010)
  • Debra P. Stark
  • Jessica M Choplin
This article focuses on a type of consumer fraud that is particularly problematic because it may not be actionable in some jurisdictions, namely the problem of consumer vulnerability to deception when a consumer notices a problematic term in a contract but is persuaded through deception to proceed with the deal anyhow. Two fraud simulation studies and a follow-up survey demonstrated how this type of fraud operates, found that consumers with certain vulnerability characteristics such as having lower socio-economic status are more susceptible to this type of fraud, and explored some of the psychological reasons why consumers are vulnerable to it including: (i) communication rituals and explanation scripts, (ii) sunk cost effects, (iii) difficult in detecting and acknowledging lies, (iv) reciprocity of trust, and (v) social norms to sign contracts as presented. The results of these studies implicate three important areas of law. First, they call into question the effectiveness of disclosure laws (RESPA and TILA) as a method of protecting consumers from predatory home lending. Second, they provide insights into consumer fraud laws demonstrating why plaintiffs in consumer fraud cases should only be required to establish reliance, rather than the higher standard of reasonable reliance. Third, they provide some insights into how courts and legislatures should treat “unfair” contract terms suggesting that courts should consider expanding upon the scope of what is considered to be “procedural unconscionability” to include the consumer vulnerability characteristics we identified. Finally, the results of our fraud simulation studies and follow up survey suggest that to protect consumers from unduly unfair contract terms, and to still be able to promote the goal of certainty of contract, legislatures should enact regulations that attempt to identify and prohibit specific categories of highly unfair terms found in various consumer contract contexts.
Publication Date
August 31, 2010
Citation Information
Debra P. Stark and Jessica M Choplin. "“A Psychological Investigation of Consumer Vulnerability to Fraud: Legal and Policy Implications”" ExpressO (2010)
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