Non-financial costs such as stress, health problems are frequently experienced by victims of financial fraud, according to a FINRA study.
The FINRA Investor Education Foundation commissioned Applied Research & Consulting LLC to study the non-traditional costs of financial and investment fraud, then published a report titled: “Non-Traditional Costs of Financial Fraud Research Report” in March 2015.
Stress – The most commonly cited non-financial cost
As part of the study, ARC conducted a nationally distributed online survey of 600 self-reported fraud victims, by giving a list of 20 scenarios of financial fraud:
The respondents were asked whether they thought they may have been defrauded in any of the above ways. Overall, three quarters of the sample indicated they had been defrauded by answering “yes” to at least one of the 20 specific types of financial fraud tested:
The respondents were also asked to think about the fraudulent incident that they considered to be the most serious. Interestingly, the amount of money lost varied considerably, with about a third of respondents losing less than $500, about the same proportion who losing between $500-$5,000 and 24% who lost $5,000 or more:
When asked how they initially came into contact with the fraud perpetrator, respondents most frequently cited introductions through a friend or family member:
According to the ARC study, victims of financial fraud place a good deal of responsibility on themselves for the incident. Just under half (47%) blame themselves for being defrauded, and 61% feel that they were defrauded because they were too trusting:
Types of non-financial costs
According to the ARC report, non-financial costs (such as stress, health problems) are more common than indirect financial costs (such as late fees, legal fees). As can be seen from the following table, stress was the most frequently cited non-financial cost, with half the respondents reported that they had experienced a serious degree of stress due to being defrauded:
Moreover, nearly 38% reported difficulty sleeping, and over 35% reported experiencing depression due to the fraudulent incident.
Turning its focus to indirect financial costs, the report points out that the most commonly cited indirect financial costs were late fees/interest and fees for bounced checks. This indicates that the loss of money from the fraud interfered with the victim’s ability to pay bills and make ends meet:
Touching upon the emotional response, the ARC report notes financial fraud victims report a variety of negative emotional reactions to the fraudulent incident, with anger being the most common, followed by regret and feeling victimized:
H/T Matt Goldstein – DealBook
See full report below.