How Consumers Get Ripped Off

December 28, 2009

Interview with Bob Sullivan, author of the book Stop Getting Ripped Off: Why Consumers Get Screwed, and How You Can Always Get a Fair Deal

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Mike Carruthers:
People make mistakes but if it’s with your bank account prepare to get punished.

Bob Sullivan:
One in three Americans was hit with an overdraft fee last year; people were charged $39 for a transgression that amounted to 10 or 15 bucks.

Bob Sullivan columnist for MSNBC.com and author of the book Stop Getting Ripped Off says many people believe that if you’re overdrawn on your account well, then you should be penalized.

Which is true by the way, I’m a big believer in personal responsibility. But in many cases, these loans (these are loans) and they have effective annual percentage rates of 1000%, 1200% that’s really what this is all about.

If you’ve ever gotten an overdraft fee or a late fee you know how irritating it can be. But there’s a bigger issue here…

This is now a way of doing business for many companies. When there was discussion of overdraft legislation in Congress, the word from the American Bankers Association was that if overdrafts were eliminated hundreds of banks would fail. Well that’s a rotten business model, if your only way to make money is to have people make mistakes and then grab them for all they’re worth, eventually people will figure that out.

So why doesn’t a bank come along and say, “Hey we’re the good guy and we won’t rip you off” wouldn’t everybody bank there?

You would think so but there’s actually been a couple studies of this which show it’s incredibly difficult to be the one fair company in an environment where everyone is unfair. The simple metaphor I always use is “You can not be the one fair poker player at a table where everyone else is cheating.

For Part 2 click here.