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Credit Cards and Cognitive Bias

Tonight PBS's Frontline will air a fascinating article on how credit card companies manipulate consumers into bad deals.  Some of the stuff is illegal, although some perfectly legal tactics rely on cognitive biases like optimism bias:"I used to use the word 'penalty pricing' or 'stealth pricing,'" [a credit card exec.] tells FRONTLINE. "When people make the buying decision, they don't look at the penalty fees because they never believe they'll be late. They never believe they'll be over limit, right? ... Our business took off. ... We were making a billion dollars a year."More details on the special is here.  There's a lesson for criminal defense lawyers in there, too.  How many conditions of probation should be inserted into a plea agreement?  Oh, of course every client will follow every term and condition of probation...continue to full post

Full post as published by Crime & Federalism on November 24, 2009 (boomark / email).