I’d love to retire the concept of Gotcha Capitalism. Unfortunately, it’s going nowhere. Companies continue to use fine print, manipulation, and information advantage to screw and cheat consumers out of nickels and dimes — at a scale that nets them billions of dollars and wrecks our market economy.
I recently sat down with radio legend Bob Edwards for a far-ranging discussion about this. Edwards has a new podcast called Take on Today that he publishes in connection with AARP. In my episode, I had to share the spotlight with someone named Joe Montana. That’s ok.
You can buy the new 10th Anniversary edition version of my book, Gotcha Capitalism: Hidden Fees that Rip You Off and What You Can Do About it, at the book’s website.
You can listen to the entire conversation by clicking play below, or by visiting iTunes.
But here are a few excerpts of our chat published at AARP.org.
llBob Edwards: For more information about the world of technology and innovation, visit aarpinnovationlabs.org.
Contract agreements can sometimes contain fine print and if you’re not careful, it can cost you big bucks. Joining us today is Bob Sullivan, an author who has spent his career detailing the perils of hidden fees. He’s written books like Gotcha Capitalism and Stop Getting Ripped Off.
Most people don’t bother reading the fine print. Why is that?
Bob Sullivan: We’re busy. People who are living their lives, they’re trying to raise kids, they’re trying to study for class, they’re trying to do their jobs. We’re not supposed to be lawyers, and one of the problems of modern time is that, we’ve all been lawyered up. So now, we really almost need to be a professional just in order to do something like buy a cell phone, get a credit card, buy milk at the grocery store, all these things are full of fine print, and that means they’re ripe for abuse.
Bob Edwards: What’s the origin of fine print?
Bob Sullivan: The lawyers, it always goes back to the lawyers. All of this is very defensive. Conceptually it’s a contract, and this is actually an idea that I balk at. You buy a cell phone, somebody hands you a piece of paper with 10,000 words on it, and you sign it and it’s a contract, but theoretically contracts require two elements. You have to be giving something and you have to be getting something. There’s consideration on both sides and you get to bargain the terms. “Wait a minute, I disagree with section 2BC here,” you know, that doesn’t happen. So these aren’t really contracts. They’re more like list of horrible things that could happen to you.
Bob Sullivan: So we’re giving you a cell phone and if you’re late, you’re going to pay this fee. If you don’t return the phone on time, you’re going to have this happen to your credit report. We might besmirch you publicly for the next seven years in front of every other company. So it’s more like a list of punishments.
Bob Edwards: I guess if someone somewhere can read it under a microscope, it’s legal.
Bob Sullivan: It’s all legal because … Well, everything’s legal, until someone challenges it in court. I think this is a really important concept that companies can claim all sorts of things. You know, when you walk into a baseball stadium, the ticket says, “If you get hurt, you’re on your own,” but you can’t really waive your liability that way. You can try, but there are lots of situations where even if the fine print says X, when you go in front of a judge and a jury, the jury says, “Why?” So, don’t always assume that what’s in the piece of paper is really the final word.
Bob Edwards: Who’s responsible when somebody is caught off guard by the fine print?
Bob Sullivan: I am of the opinion that it’s the party that knows best, is responsible. It’s kind of a generous interpretation, I would call myself a consumer advocate, so that’s why, and not everybody can agree with that position. But just to go back to say the mortgage crisis, when a lot of people sign mortgages that they didn’t understand and then they had interest rates that jumped on them or they couldn’t afford the lump payments or whatnot.
Okay, so there’s a family that wants a house for their five kids. They just had an extra kid. They’re buying a bigger house, they sign a contract and maybe they make a mistake. Lot of people want to blame that family. I blame the mortgage professional who does this five times a day, and knows what they’re doing and knows probably this family is making a mistake but doesn’t say anything about it. So for my money, the professionals who know what they’re doing, it’s their fault.
Bob Edwards: Is there a judge in this world who agrees with you?
Bob Sullivan: There are, yeah. There are plenty of, the problem is you need a lot of money and time. That family with five kids isn’t going to sue the mortgage company. You need a state attorney general to do it. You need the FTC to do it, or you need a class action lawyer to do it, so you need a professional. But yeah, there are all sorts of cases where people, when you know David versus Goliath arguments. So I think it really is important when someone feels screwed like this to not feel helpless. I’m a big believer in being as polite as you can for as long as you can, when you have these disputes. There’s always a human being on the other side, and you get more bees with honey than vinegar and all that. It’s best to be respectful, but I also feel very strongly about this.
A lot of people just get angry and that’s a big mistake. “You’ve screwed me. I’m frustrated.” Probably you feel like you’ve been screwed 25 other times in the last six months and you finally can’t take it anymore, so you start yelling and screaming. That’s not effective. What’s effective is saying what happened and what you want, very important.
Bob Edwards: Then they say, “Well look Mr. Sullivan, your name is right here under that fine print.”
Bob Sullivan: That can happen, and then you have to escalate to either threatening a small claims court case, which is something I wish a lot more consumers would do, or going to your state attorney general or complaining to a federal authority. But it’s always worth asking first and being very specific. “Look, there’s six $30 late fees here, but your website was down that whole time. So I couldn’t check my statement. I request that you waive those six $30 late fees.” I think people would be surprised how often that really works.
Bob Edwards: Who have you known that’s been affected by the fine print?
Bob Sullivan: Oh gosh, I can’t imagine a person who hasn’t been affected by the fine print. I wrote a book 10 years ago called Gotcha Capitalism, where I described this fine print phenomenon as, you know, it’s these everyday annoying things. It’s these $10 fees or the contract you didn’t realize you had signed for cable that you can’t get out of, which sounds annoying. But when you wrap all that together into a system, I argue that this has broken the US Free Market System, because no longer does the company with the best products and the best prices and the best customer service win, the company that cheats the best wins, the company with the best Gotchas.
Bob Edwards: The best lawyers, yeah.
Bob Sullivan: The best lawyers. Yeah, yeah, and that’s not only frustrating for consumers, it’s bad for the country and it’s one of the reasons our cell phone networks are terrible, because companies can get away with this misbehavior. Again, the normal reward mechanism of capitalism is not at play when their lawyers are more focused on cheating you then their technicians are focused on giving you better products at better prices.