Beware mobile phone insurance scams
The other day I found myself in a medium-security prison observing how mobile phones and other communication devices were smuggled in, hidden in shoes and games consoles. The skills of the prisoners and their accomplices earned admiration from the police and prison officers who discovered the contraband.
Master scammers are not dissimilar to these inmates. They'll exploit every new product and every change in consumer behaviour to ferret out even the smallest advantage. No wonder the evolution of mobile phones from a tool of convenience to our new best friend has become a godsend for fraudsters.
One of the most pervasive examples of this trend has been the recent wave of insurance scams perpetrated on iPhone and iPad owners. Fraudsters made some early forays into this area about five years ago, targeting conventional mobile phone users, but the level of fraud exploded when smartphones arrived on the market.
How the scam works...
George Owen, a 29-year-old cameraman, recently bought a new iPhone, and within days, received a call from a company saying that it was aware he had just purchased an iPhone and asking him if he would like to buy insurance for it.
The caller had got all his details from his phone provider, so George assumed the call was legitimate. He went ahead and insured not just the iPhone but two other phones he used for business.
George ended up losing hundreds of pounds before he realised what was happening. "I'm pretty scam-aware, but I still fell for it. I thought it made sense getting the call just after I bought my iPhone. It never crossed my mind it could be fraudulent," he says.
George is not alone in falling for this scam. Although finding out the exact number of victims is an impossible task, consumer groups' complaint boards and internet forums are full of similar stories.
To initially gain their victim's confidence, the fraudsters often claim to have a relationship with a mobile phone provider, such as O2 or the Carphone Warehouse. They may get hold of the personal details of the new phone owners through intercepted post or internal fraud at some of the big mobile phone companies.
Consumer Direct suggests that sometimes it could also be through serendipity. Fraudsters apparently buy a phone from Carphone Warehouse, for example, and simply ring 500 phone numbers on either side of their new number. Each person who answers is then read the same script offering insurance on their new phone.
Trading Standards, the Financial Services Authority and Consumer Direct are working closely with the big phone providers to stamp out this type of fraud. However, despite their best efforts, it shows no signs of abating.
Those who do fall victim always express amazement that they were so gullible. One Carphone Warehouse customer, who wants to remain anonymous, was embarrassed at the ease with which he was ensnared. "I keep asking myself why did I fall for it?" he says.
"It was because I had a brand new mobile phone number and hadn't told anyone what it was. I couldn't believe that anyone could have bought or obtained my number so quickly after I'd activated it, so I assumed it was alright. I did feel uneasy while I was giving the man all my card and address details. I was thinking all the time: 'this is unsafe, what am I doing?' - but I still went ahead."
The most irritating thing about all this is that you may not know you've been scammed until you need to claim on your insurance and find that the bogus insurance company cannot be contacted, but your premium is long gone.
If this happens to you, contact your bank and report the transaction. If you've paid by credit card, you're likely to be entitled to a refund; in some limited cases, debit card users will also be entitled to a refund.
If you need mobile phone insurance, check out the best deals online or ask your provider - there are plenty of alternatives to taking the risk of doing business with a cold-caller, no matter how plausible they appear to be.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.