Insurance may not be the best way to protect against identity theft
While this type of fraud is on the increase, most banks and credit card companies have services that can help. Chiara Cavaglieri reports
Sunday 11 July 2010
As the new ITV drama series Identity unfolds, you'd be forgiven for thinking that the criminal underworld of ID fraud is sinister and complicated.
In reality, stealing someone's identity to apply for goods and services and run up huge bills is a fairly straightforward gig for criminals. With just a few key details they can fraudulently take over your existing accounts, or apply for loans and credit cards in your name, destroying your credit record in the meantime.
"While certain people appear to be more likely to be targeted by fraudsters than others – such as people renting property with shared mailbox facilities – the threat of identity fraud is universal and is certainly something we should all be taking more seriously," says James Jones from Experian, a credit reference agency.
The latest statistics from Cifas, the UK's Fraud Prevention Service, show this is one of the fastest growing crimes. During the first quarter of 2010, there was almost a 20 per cent increase in identity fraud compared with the same period last year.
"Surprisingly, a lot of identity fraud takes place at the victim's current address and usually involves intercepting or redirecting the victim's post, whether the fraudster is attempting to apply for new accounts or take over existing ones," says Mr Jones.
Criminals are increasingly using open sources such as the internet, social networking sites such as Facebook or Twitter and births and deaths registers. Phishing is another weapon, when criminals try to get your PIN through setting up fake websites, or sending emails and letters posing as your bank.
When it comes to protecting yourself against ID theft, there are several options, but think carefully before you reach into your pocket. Insurance products are available that aim to cover the cost of fixing the problem, such as Bank of Scotland's IdentityCare policy, which costs £6.95 a month. This offers unlimited access to your credit report, monthly monitoring to identify any irregularities in your credit file, up to £25,000 towards your legal expenses to help to clear your name, up to £1,000 emergency cash and a credit report repair service.
While this may sound like a worthwhile investment, the truth is that you can get a lot of the same protection for free. First, you aren't actually liable for any money spent fraudulently as your bank or credit card provider will cover the cost of your losses as long as they don't consider you to have been negligent.
Second, these insurance policies don't cover any money lost through fraud. They cover only the cost of sorting out the mess, which in most cases will be limited. In the worst-case scenario, you may have to fork out for legal fees incurred to clear your name, but you may find that your home insurance policy already covers this so do check before paying for a standalone policy.
"Unfortunately, banks and credit card companies are continuing to cash in on people's fears of fraud by selling needless identity-theft insurance. We recently included ID fraud cover in our top 10 list of useless financial products. If you have bought ID theft insurance, read the policy carefully and think seriously about cancelling it," says Cathy Neal, a senior researcher from Which?.
Despite this, you may still want some form of protection as fixing the damage caused by ID fraud can take a long time, often leaving you out of pocket in the interim. Capital One credit card holders, for example, get a free subscription to its ID fraud alert service. This offers two free credit reports a year, allowing you to see which products you've applied for and check for mistakes. You also receive email alerts if there are any changes to your credit file, as well as assistance if you are a victim of fraud, including one-on-one help with cancelling accounts and repairing your damaged credit status.
One of the major worries, particularly in this economic climate, is that ID fraud can severely damage your credit record. Although credit reference agencies such as Callcredit, Experian and Equifax can help, cleaning up a damaged record can be a painstaking process, so it's much better to take simple steps to reduce your chances of being impersonated in the first place.
"Shred all documents, credit card or bank statements, as well as letters from doctors, employers and indeed anything bearing your full name and address or signature. Receipts can also be valuable to a fraudster, so take care to shred these too," says Richard Hurley from Cifas.
You should never give your credit card details over the phone unless you've made the call. It's also important to examine your bank and credit card statements carefully each month and keep an eye on your credit report at least once a year so that you can report anything unfamiliar at once.
If you do become a victim of ID fraud, inform the relevant issuer as soon as possible with a telephone call and a follow-up notification by post. You should request a copy of your credit report too from one of the three agencies to check the extent of the fraudster's activity.
You can also sign up to protective registration with Cifas for £14.10 a year. When you ask for the service to be enabled, a warning is added to your credit file so that its members will undertake additional verification checks to ensure the application is genuine and not one undertaken by a fraudster.
Richard Hurley, Cifas
1. If your utility bills do not arrive, contact your supplier.
2. If you have moved house, use the Royal Mail redirection service.
3. If you are going on holiday, arrange to have someone collect your post.
4. Keep your home secure, and keep your personal documents locked.
5. Treat your plastic cards, travellers' cheques and passports as securely as you would cash.
6. Protect your computer by adding a firewall and anti-virus software.
7. Don't download email attachments or click on a link in an email unless it's from someone you trust and never provide sensitive information in an email.
8. Before entering your payment details into any website, check that the URL begins with https.
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