A law office is advertising its mortgage modification service on a local radio station. If its lawyers aren't successful with a single phone call made while you wait, the ad proclaims, you don't have to pay the office's $995 fee.
Here's the problem: There's no way to get a mortgage modification with a single phone call. The process takes months, and you have to submit tons of paperwork. The most a single phone call can do is get you started with an application -- and that you can do, on your own, for free.
Yet this advertisement has been repeating on the station for weeks and doubtless is raking in business from desperate homeowners.
That makes me wonder: "Why are people so gullible?" And equally important: "Why are companies allowed to take advantage like this?"
Bob Sullivan thinks he may have some answers.
Sullivan is an award-winning columnist who writes "The Red Tape Chronicles" for MSNBC.com, which documents the many, many ways people get ripped off today, not just by outright scams but by loans that cost too much, products that don't work as they should and hidden fees that drain our wallets.
In his first book, "Gotcha Capitalism," Sullivan documented that the typical household pays $946 a year in sneaky, hidden charges from credit card issuers, financial institutions and travel providers, among others. He also showed how investment fees and commissions could suck away one-third of your retirement funds.
In his follow-up book, "Stop Getting Ripped Off," Sullivan delves into the reasons we're so likely to get fleeced. Among them are these four:
1. Americans stink at mathWe've all seen the statistics about how our students trail those in other developed nations in mathematical ability. But you may not realize the depth of our numerical dysfunction.
Here's one horrifying example from a U.S. Department of Labor study that Sullivan cites: Only 42% of American adults surveyed could add the cost of two items on a menu (one cost 60 cents and the other cost $1.95) and then figure a 10% tip.
That leaves many people at a huge disadvantage in any financial transaction, Sullivan said. They're easily duped into focusing on a loan's monthly payments rather than its overall cost, for example.
"Somebody who can't figure a tip can't buy a car, can't buy a home, can barely compare products in a grocery store," Sullivan said.
If you're good at math, don't just feel sorry for those who aren't. You should feel sorry for yourself because the market is being distorted by your math-deficient peers. A prime example is real estate, which was goosed skyward by unsustainable mortgages and then gutted by foreclosures when those mortgages exploded. For more, read "Foreclosure nearby? It's your problem."
Indeed, a cornerstone of free-market capitalism is the concept of fair market value, which is the price agreed to by willing and knowledgeable buyers and sellers. If the seller is the only one who knows the score, the system falls apart.
"Our economy can't function if there isn't price pressure at both ends of the transaction," Sullivan said.
2. We don't recognize sociopathsThe economy also requires some level of trust to function, or people would never part with their money. But too often we trust people we shouldn't, including salespeople who disguise themselves as trustworthy advisers.
How many mortgage brokers talked people into higher-rate, riskier loans just to get a kickback from the lenders? How many insurance salespeople are out there right now talking people into buying annuities under the guise of advising them about Roth IRA conversions?
What we don't realize, Sullivan said, is that the most effective salespeople are the ones who persuade us to let down our guard. They're charming, convincing and often devoid of conscience -- able to lie without remorse. They don't care if a transaction is good for you as long it's good for them.
They are, in other words, sociopaths, and they're surprisingly common, according to author and psychologist Martha Stout, who estimated in her book "The Sociopath Next Door" that up to 4% of the population is sociopathic.
We normal folks are at a distinct disadvantage when dealing with sociopaths, Sullivan said.
"We just don't expect other people to be baldfaced liars," he said.