Knowing me, knowing you: why ID protection plans are flawed for fraud.

ID theft is a major consumer concern, though there is apparently much confusion about proactive protection initiatives and apparently safe and unsafe spending behavior. For example, many consumers remain reluctant about shopping online, but they may still give out personal details over the phone in a cold call, or they may have redundant or dormant accounts and financial products which are susceptible to fraud.

If reducing fraud vulnerability wasn’t sufficiently difficult already, consumers are now being offered anti-ID theft services and ID protection insurance by banks, insurance companies and credit reference agencies. There is also considerable debate around such policies however, as they do not offer full financial compensation. In The Observer last week, Richard Brown, Chief Executive of consumer finance site moneynet (http://www.moneynet.co.uk) stated that:

"Few, if any, of them appear to offer insurance protection against actual financial loss in the event that a credit company, for example, refuses to cover the loss – and this is what consumers really need. While ID protection services may have a degree of value, they shouldn’t be used as a reason to take an otherwise uncompetitive product."

Brown continued that consumers could actually take out simple, cost effective measures against ID theft such as buying a shredder and checking credit reports regularly. The National Consumer Council (http://www.ncc.org.uk/) takes a similar approach, advising consumers to avoid becoming a victim of credit card and identity fraud by:

* Not giving personal information away too easily
* When passing details over the phone, do ensure it’s to a legitimate business. Ask friends and family for recommendations
* Shred all documents with sensitive personal data
* Choose your bank security details carefully and avoid obvious passwords
* Avoid carrying around details of your address with your credit cards
* Close any accounts you no longer need
* Check your credit file at the credit reference agencies on an annual basis

Callcredit states warning signs of identity theft and identity fraud could include:

* Bank or credit card statements start disappearing or fail to appear in the first place
* Some of your mail goes missing
* Items on your credit card bill which you did not purchase
* A debt collection agency contacts you about goods you did not order or even an account you did not open
* You receive phone calls for accounts you know nothing about
* Royal Mail writes to your address about a mail redirection order you did not request

However, by just incorporating some of the measures above and keeping a regular check on your finances (e.g. don’t activate that second credit card and then put in a box for a year!), a great deal of financial protection is already set in place and you don’t have to pay a penny.

Examples of standard protection within English law encompass:
* Protection from forged signatures on checks
* Protection from forged signatures in documents which enforce an action (the prosecution has to prove that you made the signature, rather than you prove that you didn’t)

If your credit card is stolen (or lost), you should be fully protected providing you report the missing credit card within 24 hours of the loss or theft.

If you have never had your credit record checked why not give it a go?

* Callcredit offers a service from http://www.mycallcredit.com/home.asp starting from £7.50
* Experian offers a service from https://www.creditexpert.co.uk/ with a membership fee of £49.99
* Equifax provides a credit report for £9.95 from https://www.econsumer.equifax.co.uk/

* * * * * * * * *

About Rachel:

Rachel writes for the personal finance blog Cashzilla:

http://www.cashzilla.co.uk/

Rachel lives in a straw hut in the mountains in Scotland with three wolves and a squirrel.

Contact information:

E-mail: rachel@positiveinterest.com
Tel: 0131 561 2251

Callcredit
Credit reference service