Your rights if you've been scammed

by Chris Torney on 01 March 2010  |  14 comments
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Where do you stand if you've been ripped off by a scam, or fall victim to identity theft or Chip-and-Pin fraud? Will you get your money back?

When it comes to fraud, prevention is clearly better than cure.

That's why there is so much information and advice available about the methods and tricks used by criminals to obtain our financial details and steal our cash, as well as what precautions we should take.

But despite the best efforts of banks, regulators, law enforcement agencies and websites such as lovemoney.com, thousands of people will inevitably fall victim to one sort of financial fraud or another this year.

So where do you stand if you've been ripped off by a phishing scam, or had your debit card cloned? Will you get your money back?

By and large, it depends on whether you, the victim, took reasonable steps to prevent the fraud happening, or whether you in some way contributed to your own downfall - perhaps by leaving a written reminder of your PIN in a stolen wallet.

Here are the most common types of fraud, and the view your bank is likely to take if you're affected.

Chip-and-PIN fraud

When chip and PIN was introduced just over four years ago, it was heralded by the banking industry as the magic bullet that would put an end debit- and credit-card fraud.

The system certainly appears to have been effective - it is now much harder for criminals simply to copy a card's magnetic strip and use it to make purchases on the high street.

But despite what the industry says, chip and PIN is far from foolproof. Last month, researchers at Cambridge University became the latest scientists to expose a flaw in the system, when they managed to trick a shop's chip-and-PIN terminal into authorising a payment from a stolen card, despite not knowing its four-digit security code.

Luckily, the rules on compensation for victims of chip-and-PIN fraud have changed recently in victims' favour.

Until last November, banks were allowed to reject refund claims unless their customers could prove they had not negligently disclosed their PINs.

Now, however, the burden of proof has shifted on to the banks themselves: it is up to them to show their customers had, for example, left a note of their PIN lying around for fraudsters to find.

If not, they should immediately make good any losses.

Phishing

If you get an email which asks you to log in to your bank account it is almost definitely a con known as a phishing message, designed to make you disclose your account details on a fake web page.

But some of these messages do look remarkably authentic, and lots of people fall for them.

If you think you have been tricked, let your bank know straight away so they can stop your account being raided. But if you think you have already lost money to a phishing con, you might not get a lot of sympathy from your account provider.

Banks regularly warn about phishing attacks - especially on internet bank log-in pages - and stress that they would never ask customers to log into their accounts via an email.

They could argue that anyone who has failed to heed these warnings has acted negligently, and therefore refuse compensation.

Identity Fraud

If someone impersonates you to obtain credit, you should be able to wipe the debt from your personal credit record.

Unfortunately, doing so can be a long, arduous process.

Criminals can carry out identity fraud with very little personal information - often a name and a previous address can be enough - so it is hard for banks to conclude you have been negligent in allowing your identity to be stolen.

But it can take months to discover your identity has been used by someone else, and then even longer to put matters right.

If this has happened to you, you should report the matter to the police and the lenders involved.

You will also have to contact one of the UK's credit reference agencies to ensure that the loans made fraudulently in your name are wiped from your file, and do not affect your chances of borrowing in the future.

You can also sign up for a service called CIFAS Protective Registration, which means that lenders must undertake extra checks before giving credit to you, or to someone who claims to be you.

What you shouldn't do is pay for ID theft protection. Here at lovemoney.com, we think this sort of cover preys on your fears and you usually don't need it. Read Avoid this expensive rip-off! to find out why.

The last resort

There are rarely hard-and-fast rules about when banks will compensate you for fraud losses. Usually, these crimes are assessed on a case-by-case basis, but if you can show you took reasonable precautions to avoid being a victim of financial crime, you should get your money back.

If your bank refuses to compensate you, all is not lost: you can take your case to the impartial Financial Ombudsman, which should give you a fair hearing.

Finally, don't forget that, if you think you may be the victim of a scam, you can post about it on Q&A to get advice from other lovemoney.com readers.

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