5,000 Brits caught out by clever new scam

by Donna Ferguson on 25 October 2010  |  21 comments
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Find out how to protect yourself before it's too late.

Imagine this: out of the blue, tomorrow morning, you get a letter in the post from a payday loan company asking you to repay a debt of £500. You’ve never heard of the company and you certainly never borrowed any money from them. But if you refuse to pay it, they’re going to pursue you through the courts.

You call them up and discover they’ve got a few pieces of (easily discoverable) correct information about you: your name, your postal address and your date of birth. But they have got one key piece of information wrong: your bank account number. And that’s where the money was sent.

Believe it or not, this really could happen to you tomorrow - if you’re one of an estimated 5,000 people who have been the victims of a massive payday loan scam, revealed this month by the BBC’s MoneyBox programme.

Clever scammers managed to steal at least £1.5m from payday loan company Help Loan after they noticed scant identity checks were carried out by loan applicants in a quick and easy ten-minute loan approval process.

The application process has since been modified but this will come as little comfort to the victims, who have been told to write to Help Loan via the debt recovery firm it is using, Intrum Justitia, in order to register the debt as a "false loan". This will stop the debt collection firm in its tracks while police investigations continue.

However, while this scam has hit the headlines, other similar schemes may be staying under the radar. Find out what you need to do now to stop yourself from becoming a victim of such fraud.

Don’t panic

First things first: don’t panic and go out and buy an expensive ID theft protection policy. Here at lovemoney.com, we think these insurance policies are a complete waste of money. Read Avoid this expensive rip-off to find out why.

Instead, we only recommend getting a CIFAS Protective Registration. This means lenders (who are CIFAS members) will get an alert every time a credit application is received in your name so it can be dealt with even more carefully than usual. This service costs just £14.10 a year and is far better value for money than ID fraud protection, which typically costs around £80. Just bear in mind it will slow down all your own applications for credit.

If you don’t fancy forking out for that, then make sure you at least follow these seven vital (and free) steps to protect yourself:

1) Don’t give out details

Never give out your personal details on the phone or by email unless you know exactly who you are dealing with and you know they are from a legitimate organisation. If you have received a phone call, it can be a good idea to hang up and phone back yourself.

2) Dispose wisely!

Make sure you carefully dispose of all documents that show your name and address – preferably by shredding them. This includes bank statements, letters from your doctor and utility bills.

3) Regularly check your credit record

Make sure you regularly check your credit report as this lists all credit commitments and recent credit applications, so you’ll easily see whether someone has been trying to use your ID. You can sign up to a free credit report from Experian.

4) Redirect your post

If you move house, make sure you ask the Post Office to redirect your mail to your new address – preferably for a year.

5) Listen to your instincts

If you’re worried about a company which has got your personal details, listen to your instincts and seek advice of the lovemoney.com community for free by posting a question in our Q&A section.

6) Check your bank account regularly

Make sure you check your bank account on a regular basis and look out for any unusual transactions. A really easy way to do this is with the lovemoney.com online banking tool which amalgamates information from all your different providers, allowing you to see all your different statements at a single glance, with a single log-in. (You can also categorise all your transactions, so you'll know immediately if some of your spending seems out of place.)

This is a really easy way to keep an eye on your transactions, because every time you visit lovemoney.com to read our articles, you can quickly log into the online banking service.

7) Log out

When using any online banking, it’s important to remember to log out properly, so that your details aren’t visible to anyone else.

I’m a victim – help me!

If you think you have been a victim of ID theft, you should immediately report it to one of the three main credit reference agencies: Experian, Equifax and CallCredit.

You should also report it to the police and to the relevant organisation (your bank, the DVLA, the Identity and passport service etc). And you should contact Action Fraud  - they can provide advice, while details of your experience will go towards helping cut out fraud in the future.

Chased for a debt you don’t owe

Finally, if you’re ever chased for a debt you do not owe, contact the free debt advisory service National Debtline immediately. They will send you an excellent information pack with a template letter to use confirming that you had no knowledge of the debt and outlining the various ways any letter you have received may be in conflict with the Office of Fair Trading’s debt collection guidance.

Send your reply by recorded delivery and print off the electronic proof of delivery. Should the debt collection company continue to harass you, report the company to trading standards, the Office of Fair Trading and the Financial Ombudsman, and let us know how you get on here at lovemoney.com. Good luck!