By Melody Lashmar - In my search for any indication that someone has investigated this problem of Consumer Initiated Fraud, I came across a survey that was published in the Journal of Marketing in October 1978. The title of this publication is "Fraudulent Behavior of Consumers. The other side of fraud in the marketplace: consumer-initiated fraud against a business." This survey was conducted in an era during which consumers were mainly transacting in a face-to-face environment. The ACH network was only 4 years old and there were very few, and closely controlled, transactions flowing through its network.
The article started out by framing the annual cost of retail-level fraud by consumers. They reported that annually fraudulently cashed checks totalled at least $1billion; fraudulent redemption of coupons was worth $100Million; store losses due to shoplifting translated into a $150 tax per family passed on through higher prices, and because of these abuses, business spent $2 billion on store security. It is important to remember that these figures represent values from 35 years ago. Using http://www.dollartimes.com/calculators/inflation.htm let us determine that only using the rate of inflation to get today’s values you would simply multiply each of those figures by 3.63. Astounding numbers, even without considering the natural growth of consumer initiated fraud.
The survey looks at 15 different fraudulent situations but I chose four as representative of the mindset and opportunity afforded the consumer in an online environment.
I chose "shoplifting" because that is a consumer stealing, with no attempt or intention to pay. We see this everyday in the news concerning people downloading copyrighted content for free. I chose "using a worthless check" because this represents people knowingly using a payment instrument that will fail. This is also an interesting one because, for the most part, this act is a criminal offense. "dishonest coupon use" was defined as people handing coupons over to the check out that contained coupons for items they did not purchase. "Invalid warranty claims" were knowingly making a warranty claim for an item out of warranty. These last two I equate to consumers who knowingly state to their bank or a merchant that they did not authorize a transaction as well as those consumers who claim both fraud and a refund to make some money on their double dip.
One of the aspects investigated was people's attitude toward various fraud situations. Shoplifting .9% said it is NOT wrong and another .8% said it is not serious. In terms of using a worthless check 1.7% said it is understandable and 13.1% said it is not serious. Dishonest coupon use had 2.6% state it is not wrong, another 29.3% saying it is not serious. Invalid warranty claims sat at 1.4% not wrong, 9.7% understandable and 36.1% saying it is not serious.
The survey then asked respondents to evaluate the situations from the behavior of their friends. The respondent selected either Most of the time, Once in a while, Very Seldom and Never. The results for shoplifting were 9.5% most of the time, 1.7% once in a while. Using a worthless Check had 7% most of the time and 9.5% once in a while. Dishonest coupon use scored 7.8% most of the time and 18.9% once in a while. Invalid Warranty Claim sat at 22.2% most of the time and 34.7% once in a while.
Finally the survey asked respondents about what they perceived as appropriate actions related to each of the situations. The potential responses were Management should: Do Nothing, Take Preventative Action, Give Warning or Notify Authorities. Related to Shoplifting, 1.7% responded Do Nothing, 0% take preventative action, 59.5% said Give Warning. Using Worthless Check rated .9% Do Nothing, 6.1% Take Preventative Action, 60% Give Warning. Dishonest Coupon Use posted results, 2.6% Do Nothing, 6.9% Take Preventative Action, and 26.7% Give Warning. Invalid Warranty Claim reported, 2.8% Do nothing, 13.9% Take Preventative Action and 29.1% Give Warning.
I encourage you to read the entire publication as it really does investigate and evaluate the issue of consumer initiated fraud. This is an area that needs to be re-examined to represent the behaviours of consumers from this century!
