James Daley: It's up to the banks, and not their customers, to stop card fraudsters

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The Independent Online

The news that credit and debit card fraud in the UK has risen to record levels yet again this year made particularly depressing reading this week.

The news that credit and debit card fraud in the UK has risen to record levels yet again this year made particularly depressing reading this week. More than 18 months after Chris Pearson, the chief executive of Apacs (the trade body responsible for payment services), boldly declared that "enough is enough", the industry is still failing desperately to make any significant inroads into preventing what is becoming a plague on UK consumers.

While the industry has spent much of the past year congratulating itself on the successful implementation of "chip and pin" cards - a no-brainer initiative which the French (and just about everyone else) have been using for over a decade - it has done almost nothing to tackle other areas of fraud which have been escalating at alarming rates.

Over the 12 months to the end of June this year, losses from identity theft, cash-machine fraud and card theft in Post Office mail rooms all increased by more than 50 per cent. At the same time, counterfeit card fraud fell away slightly, as the perpetrators of these scams began to realise that chip and pin will make their line of crime much harder to pull off. The fraudsters are moving on, so what exactly is holding back the industry?

While Apacs and the banks claim they have been busy working on solutions to combat cash-machine fraud (where machines hold your card, only to spit it back out into the hands of the fraudsters once you have walked away), this is no new problem.

Almost £25m of this type of fraud was committed in 2002 yet no progress has been made in reducing its growth. In the year to the end of June, over £61m was lost to cash-machine fraud - representing more than 12 per cent of the UK's total card fraud. How difficult can it be to prevent this? CCTV and anti-tampering devices should be commonplace for cash machines. But the industry's slow reaction has seen all of these upgrades take an age to be implemented.

On identity fraud, Apacs and CIFAS, the fraud-prevention service, have not been doing enough, in spite of their claims that they have been cracking down. An industry-wide initiative to combat this type of crime was launched 16 months ago - yet it appears to have amounted to not much more than a few training courses for front-line staff and the publication of a big manual cataloguing how one might go about preventing it. Once again, any real progress is yet to be seen.

And as for the Post Office, where do I start? Stories of mail being dumped in the river, stolen, or lost have been all too commonplace - yet the number of cards being used before they even make it to their owners has increased by 51 per cent over the past year. Perhaps it is too early to apportion blame on Adam Crozier, the Royal Mail chief exec, who has only been in the job since May. But if he does not put an end to this endemic theft, it will be an issue that comes to haunt him next year.

The conspiracy theorist might say that a healthy level of fraud is in the banks' interest. After all, just about every prudent card-user now has an insurance policy to protect them from the worst. But consumers should not be made to pay for the failings of the financial services industry. In a country that now has more credit cards than people, it is time the banks owned up to their responsibility and put up the necessary resources to flush out fraud for good.

Scaring the mortgage brokers helps no one

It came as no surprise to me this week when a handful of mortgage brokers told me that the first two weeks of the sector's regulation by the Financial Services Authority (FSA) have been a nightmare.

Although most people, myself included, support the idea of a regulated mortgage sector, the FSA has instilled such fear into those it regulates that many have been too scared to take on normal levels of business over the past fortnight. Several lenders have withdrawn offers or even temporarily shut their doors to new business, in case they fall foul of the new guidelines. As a result, many brokers have struggled to find the most competitive deals for their clients.

Having levied over £20m in fines on more than 20 firms in 2004, the FSA has made it clear it is not to be messed with. But there comes a point when its heavy-handed approach scares companies so much that they are unable to offer a confident and competent standard of service.

The FSA is damned if it does, and damned if it doesn't - blamed for not being hard enough, then blamed for stifling the industry. But surely there is a better balance than the one it has found so far? Both its chairman and chief executive have said that they do not want to create an "enforcement-led" regulator, but that is what they have done.

The mortgage industry needs its hand held over the next few months, not an axe wielded over its head.


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