CONSUMER FRAUD - AN ANALYSIS OF IMPACT AND OPPORTUNITIES FOR INTERVENTION - CONSUMER FRAUD INTERVENTION STRATEGIES

• NCJ Number: 52675
• Author(s): J A SHELDON
• Date Published: 1978
• Length: 189 pages
• Grant Number(s): 76-NI-99-0122
• Sponsoring Agency: US Dept of Justice
• Corporate Author: American Institutes for Research; National Consumer Law Ctr
• Sale Source: American Institutes for Research; National Institute of Justice/
• Language: English
• Country: United States of America

Annotation

SEVEN CONSUMER FRAUD INTERVENTION APPROACHES ARE ANALYZED ALONG WITH THE EFFECTIVENESS OF 22 ILLUSTRATIVE STRATEGIES IMPLEMENTING THESE APPROACHES.

Abstract

DESIGNED TO PROVIDE A BASIS FOR SUBSEQUENT EFFORTS TO DEVELOP INTERVENTIONS FOR SELECTED FRAUD PATTERNS, THIS REPORT EXAMINES THE STRENGTHS AND WEAKNESSES OF COMMON AND LITTLE USED FRAUD ENFORCEMENT MEASURES. BY EVALUATING EXISTING STRATEGIES, INNOVATIONS WORTHY OF FUTURE EXPLORATION ARE SUGGESTED--BOTH REFORMS OF EXISTING INTERVENTIONS AND THE DEVELOPMENT OF NEW STRATEGIES MORE EFFECTIVELY IMPLEMENTING ONE OR MORE OF THE SEVEN INDICATED GENERAL APPROACHES. THE FIRST APPROACH, DETERRENCE, UTILIZES THE THREAT OF PRISON SENTENCES, MONETARY PENALTIES, OR OTHER SANCTIONS TO DISCOURAGE SELLERS FROM ENGAGING IN CONSUMER FRAUD. IN CONTRAST TO THIS PROSPECTIVE REMEDY, A SECOND APPROACH, COMPENSATING VICTIMS, SOLELY ORDERS OR CONVINCES OFFENDING SELLERS TO RETURN DEFRAUDED CONSUMERS TO THE STATUS QUO. WHILE BOTH OF THESE REMEDIES RELY ON GOVERNMENT PROSECUTION, COURT ADJUDICATION, OR AGENCY MEDIATION TO EFFECTUATE THE STRATEGIES, A THIRD APPROACH, SELF-ENFORCING REMEDIES, ALLOWS CONSUMERS TO DIRECTLY REDRESS OR DETER FRAUD WITH LITTLE OR NO GOVERNMENT INTERVENTION. ANOTHER APPROACH ATTEMPTS TO CONTROL MERCHANT BEHAVIOR, THUS PREVENTING CONSUMER FRAUD. BY LIMITING SELLERS WHO CAN ENGAGE IN AN OCCUPATION OR RESTRICTING SALES METHODS OR CONTRACT PROVISIONS, FRAUD BECOMES MORE DIFFICULT TO PERPETRATE. A FIFTH APPROACH IMPROVES CONSUMERS' PURCHASE DECISIONS SO THAT THE CONSUMER'S OWN MARKETPLACE VIGILANCE PREVENTS FRAUD. DECISIONMAKING IS ASSISTED BY EITHER GIVING THE CONSUMER MORE INFORMATION OR RESTRICTING THE DECISIONMAKING PROCESS. A MORE DIRECT APPROACH LIMITS THE AMOUNT OF MONEY AT STAKE IN A SALES TRANSACTION, LIMITING CONSUMER LOSSES AND MERCHANT'S INCENTIVE TO DEFRAUD. THIS CAN BE ACCOMPLISHED EITHER BY LIMITING THE PRICE OR BY DELAYING PAYMENT UNTIL CONSUMERS DETERMINE THEY HAVE NOT BEEN DEFRAUDED. A FINAL APPROACH SHIFTS THE BURDEN OF PAYING FOR AND POLICING FRAUD FROM THE CONSUMER AND GOVERNMENT TO THIRD PARTIES. COMMON THIRD PARTIES ARE CREDITORS, INSURANCE COMPANIES, AND CORPORATE OFFICIALS. REFERENCES ARE FOOTNOTED. (AUTHOR ABSTRACT MODIFIED--KBL) (AUTHOR ABSTRACT MODIFIED--KBL)