The ethical and policy implications of profiling ‘vulnerable’ customers

Abstract

In the shadow of the global financial crisis, the issue of the marketing of credit has become an increasing concern in the past 12 months. Outstanding personal debt in the UK currently stands at £1479 billion and is rising by £1 million every 10.6 min. In Australia, there is currently $44.6 billion worth of outstanding credit card debt, and in the US, $2596 billion was owed on credit cards in 2008. At present, the banking sector utilizes sophisticated research methods to profile consumers, including those who might be considered financially vulnerable. However, the policy frameworks in most industrialized countries do not account for this form of target marketing when considering how to protect vulnerable groups. This paper is an initial attempt to examine the different methods by which profiling is conducted and the policy implications of this sophisticated form of segmentation and targeting. We argue that current consumer policies are inadequate in protecting vulnerable consumers from these marketing techniques, and recent recommendations from the Federal Reserve Bank of the United States, and the Australian Law Reform Commission to allow banks and lenders to ‘pre‐screen’ potential customers will exacerbate personal debt levels, rather than reducing them.

The concept of consumer vulnerability: Scale development and validation

“…Many scholars have explored factors that may lead to consumer vulnerability (Baker, Gentry, & Rittenburg, ; Harrison & Gray, ; Morgan et al, ). Some studies conclude that internal factors, such as physical state and cognitive competence, cause inconvenience and inefficiency to consumers, especially the disadvantaged ones, during the purchasing process (Baker et al, ; Morgan et al, ).…”

“…Some studies conclude that internal factors, such as physical state and cognitive competence, cause inconvenience and inefficiency to consumers, especially the disadvantaged ones, during the purchasing process (Baker et al, ; Morgan et al, ). With the rapid development of technology, the marketplace has become more complex and studies suggest that external factors such as the changing marketing environment and techniques that may lead to information asymmetry have also triggered consumer vulnerability (Baker et al, ; Harrison & Gray, ). Some researchers define vulnerable consumers as those in a disadvantaged position in market interactions, who lack the ability to protect themselves and, thus, whose consumer welfare is more easily harmed by experienced or unethical businesspeople (Langenderfer & Shimp, ; Lee & Soberon‐Ferrer, ).…”

Vulnerability in a tracked society: Combining tracking and survey data to understand who gets targeted with what content

“…Thanks to targeting strategies, marketers can also decide to target only certain proportions in society, and not others. Examples are the targeting of so-called “profitable consumers” (Harrison and Gray, 2010), or, more in the political realm, the practice of “redlining” (Gorton, 2016; Zuiderveen Borgesius et al, 2018). This can result in a situation in which certain groups of users may be excluded from the economic benefits stemming from personalized advertising, such as offers and discounts (Wilson and Valacich, 2012), or certain political messages (Kreiss, 2012).…”

Consumer rights of the elderly as vulnerable consumers in South Africa: some comparative aspects of the Consumer Protection Act 68 of 2008

“…When considering the use of something technologically advanced such as the internet, it is argued by Eastman and Iyer () that policy makers interested in increasing the participation of seniors, can utilize the Internet to reach those who are younger in terms of cognitive age. In the financial sector, the policy to allow banks and lenders to ‘pre‐screen' potential customers will exacerbate personal debt levels, rather than reducing them and can also lead to the inaccurate assessment of elderly consumers as being vulnerable when they are not or vice versa (Harrison and Gray, ). The absence or presence of vulnerability in elderly consumers may also be determined from a typographical perspective as Kolodinsky () argues that there is a difference between urban and rural elderly consumers and what they regard as consumer satisfaction.…”