Scams are always with us and always evolving. The creativity and the context of the scams change, but the techniques behind them and the emotional levers being pushed remain the same. In the past when I read about scams, I wondered how people could be so gullible. I assumed that the victims of fraud were particularly vulnerable: perhaps elderly, less educated, socially isolated, or grieving the loss of a loved one.
While there’s some data that suggests this can be true, being scammed can happen to anyone. Hardly a day goes by that I don’t have some type of email scam in my inbox. And I have to admit that I have fallen for phishing scams a handful of times. Nobody is immune to fraud. Scammers are experts at targeting our emotional needs and using the cognitive biases that all of us have.
Let’s look at a small sampling of current scams to consider how our cognitive biases and emotions play into them.
1. Upfront fee scams. These can take a variety of forms, such as a loan application, an item for sale online, an investment “opportunity,” or a bid for a home repair. Once you’ve paid the upfront fee, the scammers either come back asking for more or disappear. In either case, your money is gone and you don’t get the item or service.
A common cognitive bias in this type of scam is narrow framing—making a quick decision without gathering or being fully aware of all the facts and without considering the implications. I once needed a floor refinished, paid a contractor upfront to do the job, and never saw him again. I had not checked out his background, stability, credit rating, or bonding. Nor did I consider the possibility that paying in advance left me no leverage in case he did shoddy work.
Another cognitive bias involved for me was anchoring—relating a current experience to something familiar in the past. In this case, I had previously dealt with reputable contractors and assumed this person would be the same.
2. Shipping scams. These often involve fake texts purporting to be from a company like FedEx or UPS. One type says you owe a small fee for a missed delivery. If you follow the link, you are taken to an authentic looking but fake website where you are asked to fill out a form. Then, depending on what data the scammers collect from you, they can target your bank account or credit card, perhaps with a phone call or message that your account has been compromised and you need to move money to a new account.
One cognitive bias that may be involved here is action bias—responding to feelings of anxiety by quickly going into action (even when doing nothing may be the better alternative). Another could be loss aversion—placing more emphasis on the potential loss of not getting the delivery if I don’t pay the fee than on the potential gain of not being scammed if I do nothing. Either bias can get in the way of pausing to consider carefully whether you are expecting a delivery or have ordered something at all.
3. Tax scams. These are emails, phone calls, or texts meant to convince you they are from the IRS or another government entity and claiming you have an unpaid tax bill. You may not know that this is not the way the IRS or other agencies operate. You are likely to respond with a spike of anxiety. The cognitive biases involved might include narrow framing and action bias.3. Tax scams. These are emails, phone calls, or texts meant to convince you they are from the IRS or another government entity and claiming you have an unpaid tax bill. You may not know that this is not the way the IRS or other agencies operate. You are likely to respond with a spike of anxiety. The cognitive biases involved might include narrow framing and action bias.
4. Charity scams. These fraudsters may pose as legitimate charities, often using names similar to those of well-known reputable organizations. They may pretend to be individuals with urgent health needs. They may pretend to raise money for victims of genuine natural disasters or crises like the war in Ukraine. Narrow framing and anchoring could be two of the cognitive biases affecting your response.
These are only a few of the biases and emotional vulnerabilities exploited by scammers. Here are several others:
• The need for reciprocity; if someone does something for us, we feel obligated to do something for them.
• Fear of missing out.
• Fear of offending someone or being rejected.
• Wanting to be seen as trustworthy.
• Needing to be seen and to feel connected.
Underneath all of these biases, of course, we have our vulnerabilities, fears, hopes, needs, and unfinished business. The psychological skill of scammers is one more reason that doing emotional work matters. It often pays off financially as well as emotionally.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.
