Recently, my grandmother went to refill her Total gas cylinder and was conned on the way. A friendly young man approached her and convinced her that the red/ orange gas cylinder was bad. He exchanged it for a beige one that was of ‘better quality’. My grandmother profusely thanked the guy, believing he had saved her. I suspect she even tipped him. Needless to say, the cylinder was faulty, didn’t have a safety test stamp and had to be replaced. It was easy for the con man to convince her that the red/orange gas cylinder was bad since she fears and dislikes anything reddish in colour associating it with bad luck. It also helped that the con man seemed friendly and was smiling while interacting with her. To her, this was a sign that she could trust him. In his book, Talking to Strangers, Malcom Gladwell warns us about judging strangers based on the simple clues they let on or signal. Beyond ensuring there are no fakes in the market, do policy makers have a role to play in changing or managing people’s beliefs, biases and prejudice to ensure consumer protection?
Protecting consumers against common biases
There are some known biases common to man that market players exploit. Herein lies the opportunity for consumer protection. Our perspective of the world and the beliefs we hold are very diverse and determined by various factors – with our environment playing a huge role. It would be unrealistic to expect the government to course correct at an individual level. However, there are opportunities to protect against common biases, for instance, emotional decision making. It is a known fact that strong emotions trigger impulse buying – such emotions are referred to as a hot state. A hot state is when our mental state is influenced by strong emotions such as anger, hunger, sexual desire, exhaustion, fear e.t.c. Such emotions can be triggered intrinsically or by an external stimuli e.g. an advert. The UK legislation have mandatory cooling-off periods for certain financial products and services. This period gives the consumer time to re-consider their decision and even cancel if they want to. In addition, retail outlets for clothes, shoes, phones, accessories e.t.c have this cooling off period. If you make an irrational purchase of an iPhone, or a designer handbag in London, you can return it within 14 days – or more in some cases. People in developed world may take that for granted but consider a case of an aggressively sold asset or land loan which has been misrepresented. Such a policy would play a huge role in curbing manipulative tactics that take advantage of human biases. It would also ensure the providers double check if the product is a good fit for the consumer and has positive outcomes. A market lady with her hard-earned savings at stake and other vulnerable groups would be the greatest beneficiaries of such consumer protection policies.
Systemic approach to consumer protection
Achieving consumer protection is the ideal situation for policy makers and regulators and it is key to adopt a systemic approach. Recently, financial consumer protection has been prioritised due to the fast-paced growth of FinTechs in developing markets like Kenya. Protection in such cases may include ensuring financial service providers’ are transparent about the cost to the consumer, warning customers about identity theft, pyramid schemes that promise high returns and other frauds as listed by CBK. However, many scams are happening under the radar which ultimately affect consumers’ financial health hence the need to have a broader perspective when developing consumer protection policies. They range from pump and dump scams that we discussed in this blog to unscrupulous ‘professionals’ who have optimised their SEO and appear top on google searches. In Africa, internet access is growing posing a great risk of misinformation and exploitation. In this age of deep fakes and misinformation, I was amazed that in the UK, when you google certain symptoms, the National Health Service (NHS) appears first on the search results. That would give anyone confidence. Compare this to ‘professionals’ who a youth in Murang’a would not know how to verify e.g. a financial advisor, doctor or lawyer. Vulnerable groups and people with low (financial) literacy are more prone to such risks that diminish their financial resilience according to GSMA. Policy makers should build a systemic approach that ensures correct information is available at the basic level (provided by known local institutions) and is easily identifiable by the vulnerable to both build trust and protect them.