My credit card company and Russian mafia tactics

My credit card company and Russian mafia tactics
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First Published: Wed, Jan 30 2008. 06 57 PM IST
Updated: Thu, Jan 31 2008. 11 16 AM IST
Sometimes my life feels like a series of never-ending frustrations. The last three products I bought at Best Buy—a large electronics store—had to be returned because they simply didn’t work. The DVD from Amazon has a fatal skip. My wife’s new Mac computer doesn’t function on our wireless network. I dread any call to customer service. A wait is followed by a transfer, which is followed by two more transfers, which is in turn followed by a promise to call me back. The return call never comes. My billing dispute on my AT&T credit card dragged on since May, mostly because they simply didn’t find it worth their while to respond to my letters. It was resolved last week, and not in my favour.
Does that sound familiar?
The sad truth is that most suppliers simply don’t care. And those that do care are often seeking to actively harm us. I’ve had art dealers try to sell me fake paintings, cellphone companies impose obscure roaming charges, and brokers who try to get me to trade stocks—and pay commissions—for no good reason at all. Car mechanics tell me to invest in repair work and I never know if it was necessary or a simple fraud.
Modern life involves more fraud, more bad service, and more non-transparent pricing than ever before. A lot of times it’s just not profitable for businesses to invest in decent treatment of human beings.
And who can fight back? Every now and then we squawk, but we don’t want to waste our lives in quixotic battles against suppliers who simply couldn’t care less.
The fraudsters, of course, know how tired and busy we are.
The clever ones set the level of their fraud at just the level where we don’t find it worth our while to complain.
For instance, I’ve had fraudulent credit card charges of $2.13 on my bill. At first I wondered: why didn’t they just add a charge for $2,000? But then it hit me. For a false billing of $2,000 I would complain, but for $2.13 I would not. Once they shut down your credit card, it is a pain to get a new one up and running again. My wife says that is a common trick of the Russian mafia.
And is government the answer to rising fraud in our lives?
Sadly not. Yes, the government should regulate fraud and in many instances government penalties for fraud should be toughened. But that’s not going to make the problem go away.
The key issue is that we, as consumers, don’t have the time, attention and energy to pursue or even identify all of the frauds we encounter.
Governments don’t have those resources either, and even the most zealous and well-funded regulators rely on consumers for complaints and information. If no one complains, even an efficient bureaucracy (are there any?) won’t take swift or decisive action.
But there is a silver lining to this cloud and indeed it seems that consumers will fare okay in this world of growing fraud, even if we feel increasingly harried.
Think just for a moment about what fraud means. Fraud means that the seller is lowering costs, raising revenue and enjoying higher profits.
In the short run that is bad for the customer. But in the long run it means there will be more suppliers and more competition for our business and thus lower prices.
Take the proverbial cheat auto mechanic. Maybe half the time he will charge you even when he hasn’t done any useful fixing. But in the long run that extra revenue will draw about twice as many auto mechanics into the industry to compete for your money. Yes, they will be ripping you off half the time but prices will fall by a roughly proportionate amount.
In the long run, you, as a consumer, will do okay. You pay twice as often as you ought to, but as a consolation each time you pay only about half as much.
So, there you have our future.
Things will be a lot cheaper, and there will be more goods and services for the taking. The cornucopia of plenty and diversity will become ever greater. Every year shopping will be more fun and the stock of stuff in your house will be more impressive and cheaper to acquire.
Yet, irritation and frustration will grow at about the same rate. Fraud, or at least lack of concern for the consumer, will be pushed in your face just about every week and sometimes every day. It’s just not going to get better.
If you need consolation, I have two suggestions.
First, count your blessings and read some Buddhist or Stoic philosophy. Second, take your revenge in the form of lower prices.
In the short run, one supplier can rip you off pretty easily. In the long run, it is harder for the world as a whole to avoid giving you a pretty good deal.
Tyler Cowen is professor of economics at George Mason University and author of Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.
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First Published: Wed, Jan 30 2008. 06 57 PM IST
More Topics: Credit | Consumer | Technology | Competition | Service |