How to fight an identity fraud

Falling victim to identity theft and fraud can be unpleasant enough, but getting your money back can be a real headache. While banks, current account providers and other financial institutions have systems in place to sort out rogue transactions, the process is not always straightforward, as the story below shows.

The average ID theft results in a loss of £608 for the customer, but the good news, in theory, is that you should almost always get your money back. The Banking Code requires subscribers - which include all the main current account providers and most credit card providers - to refund fraud-related losses unless they can prove the customer has been negligent.

"The code covers your rights and protections as a banking customer," says Gemma Smith from Apacs, the organisation that runs the UK's payments system. "The onus is on the bank to prove negligence on your part," she points out - so the bank must have good reason to reject your claim.

Many banks have systems in place that should detect unusual spending - before any funds are transferred, a representative will ring the customer to check whether they are the legitimate owner of the card.

University student Collette Mosca did not know she was the victim of a fraudster who purchased goods worth £500 from an online pharmaceutical company until she received a phone call from her bank when the fraudster tried to use her details again. "They asked if I was buying a train ticket and I asked, 'What ticket?'" Mosca says. "To get my money back I had to speak to a few different departments and they kept testing me to check that I wasn't lying."

Mosca's money was refunded within five days. The banks say this is the sort of timeframe they aim for, but none will guarantee to make refunds within any given period and cases can take much longer to resolve.

But getting your money back is only part of the process of sorting out fraud. "One of the major downsides of fraud is the damage done to your credit rating," says James Jones of the credit rating company Experian. "It can take a very long time to get everything sorted. It could be a couple of months, depending on how widespread it is."

If fraudsters have used your financial details to set up accounts with organisations such as mobile phone companies and retailers, they won't be covered by the Banking Code. You may need to chase down each account individually.

Act fast if you suspect you have been a victim of fraud. Contact card providers and other relevant account providers as soon as you can. Report the fraud to the police immediately. If you think your post may be being fraudulently diverted, contact the Royal Mail's investigations service.

Once you've alerted people to the fraud, it's worth getting in touch with the three main credit reference agencies - Experian, CallCredit and Equifax - which can amend your file to prevent you being rejected for credit in future. For a £2 fee, these organisations will send you a copy of your file so you can see what impact the fraud has had.

It's also worth registering with CIFAS, the UK's fraud prevention service. For a small fee, your name and address will be earmarked by lending agencies so that extra steps will be taken to prove your identity when a transaction is made in your name.

'I had to battle Lloyds TSB for a year'

People assume that banks have watertight investigation systems, but that's not always so. In a case investigated by Save & Spend, mistakes by Lloyds TSB led to an innocent person facing threats of legal action for a year.

For Emma Richards, the nightmare ended only when she asked us to intervene. "The first letter [from Lloyds TSB's debt collectors] was dated 16 March last year," says Emma, from Swansea. "That letter said it was the start of legal proceedings, taking me to court."

Lloyds claimed Emma owed the bank £14,241.13, supposedly relating to an account she had with it. But Emma has never had any account with Lloyds. And attempts to get the matter resolved by speaking and writing to Lloyds got nowhere. "At first, I just assumed they would realise the mistake and drop it," says Emma.

But, rather than investigating, Lloyds kept referring Emma to its debt collectors. When Emma contacted The Independent, she said: "I am getting nowhere. I have sent copies of my birth certificate, address details, personal information, anything they requested. I know these matters take time, but it's been nearly a year and nothing!"

Lloyds told Emma to report the matter to the police. The police refused to investigate as she had not lost out personally. Meanwhile, Lloyds TSB refused to investigate the complaint until Emma had a police crime reference number. Emma's credit rating dived and she was rejected for credit cards, loans and a mortgage.

Within two days of The Independent's involvement, the bank accepted that Emma did not owe it the money. Emile Abu-Shakra, Lloyds TSB's spokesman, says: "The £14,000 debt belongs to someone with the same name and date of birth who also lives in the Swansea area. Having lost contact with that customer, we appointed 1st Credit to trace them and they mistakenly contacted Ms Richards.

"As soon we were made aware of what had happened we advised 1st Credit to cease all contact. We have made sure that Ms Richards' credit rating has not been affected. We are of course very sorry for the inconvenience and distress..."

Lloyds TSB sent Emma a cheque for £150 as a goodwill gesture, which she thought insufficient. The bank - 2006 profits, £4.2bn - agreed under pressure from The Independent to pay her £300.