Fraud: Do you already know the person targeting you?
Karen Jenkins*, 34, a medical researcher from Peterborough, Cambridgeshire, took in a lodger to earn some extra cash; it was a decision she came to regret bitterly.
"He seemed fine, and everything was OK for the first three months," she says. "Then he disappeared one Friday night." And that's when the nightmare began.
The lodger, a 40-something unemployed heroin user, had taken Karen's bag, containing her credits cards, an unused chequebook and jewellery. She reported the theft to the police and cancelled her cards, but noticed £2,500 had been withdrawn from her bank account a week later.
"He'd obviously used a female accomplice to impersonate me and cash the cheque," says Karen.
Then a number of store card accounts were opened in her name, as the thief had her postal address, date of birth and national insurance number. Bills started arriving for as much as £500 on each card; another £2,500 was taken from her bank account.
"It was so stressful," says Karen, "I became afraid to open the post. I had to close down my bank account completely. The police didn't seem to be doing anything."
Eventually the fraudster was convicted and given a two-year suspended sentence, but he only had to pay Karen £400 in compensation. Worse, her home insurance didn't cover the loss of her jewellery because the lodger had been able to gain access to the house without force.
For more on fraud watch our Moneywise TV episode: How to avoid scams
Karen used CPP, an ID fraud specialist, to clean up her credit record and, apart from the jewellery theft, didn't lose out financially as a result of the fraud. But she says: "I find it hard to trust anybody now. I've even put locks on my bedroom door."
Unfortunately, Karen's is not an isolated case. Identity fraud is on the increase, with nearly 80,000 cases reported in the first nine months of 2010, up almost 10% on the same period in 2009. The National Fraud Authority estimates that ID fraud costs the nation £2.7 billion every year.
What's particularly shocking is that nearly a third of ID fraud victims think they know who the perpetrator is, according to research by credit reference agency Experian. And most of those believe it to be a family member or someone they know well. So how common are such cases - are there really grounds for suspecting your nearest and dearest?
First, we need to have a look at the way identity fraud is carried out and how this has changed over recent years. ID fraud is the use of a stolen or false identity to obtain goods and services by deception. It was traditionally achieved using forged or stolen identity documents, such as passports, or utility bills stolen from dustbins.
The digital threat of ID theft
But in the digital age, with the rise in online banking, e-commerce and social media, it has become far easier to access personal details and build up a convincing picture of someone else's identity. The proliferation of new technology means there are many more routes available to fraudsters.
For example, more than two thirds of people who access the web through their mobile phone do so without using passwords or PINs to secure their handsets, according to the Get Safe Online Week Report 2009. This leaves them vulnerable to fraud, should they lose their phone or have it stolen.
CIFAS, the UK's fraud prevention service, published a report into online fraud in October 2010, arguing that one of the main reasons for ID fraud growth has been the sheer amount of personal data now available to fraudsters, much of it stolen from company databases, personal computers and social networking sites.
This means fraudsters can now adopt hundreds of different identities, cut down on the number of fraudulent transactions per victim, and thereby reduce the chance of detection. We're much less likely to notice a one-off, relatively small entry on our credit card bill or bank statement than a whole string of dodgy debits.
Read our 10 steps to protect yourself against identity fraud here
Richard Hurley, spokesperson for CIFAS, says: "Before the credit crunch, ID fraud was actually decreasing. But now it's back in vogue - there's been a noticeable increase. And the typical target has changed from the affluent professional to the wider public, as the prevalence of personal data has made it easier for organised criminals to pilfer security details."
So how likely is it that the fraudster will be known to their target? James Jones, Experian consumer education manager, admits that while many victims may suspect someone close to them, there is usually little hard evidence to back it up.
"ID fraud victims tend to be upset, confused and frustrated," says Jones. "By suspecting someone they know of the crime, they may well be jumping to the wrong conclusion in the heat of the moment. We advise people not to do this, but come and talk to us first."
Hurley shares this view: "While it's undoubtedly true that some close friends and relatives are prepared to rip off people they know, there's no hard evidence to suggest this phenomenon is on the rise.
"Victims want to blame people they know because they can't accept they've been so lax with their personal data or that they've been randomly targeted."
Jones cites a case he dealt with recently: "One lady I advised found that a huge loan had been applied for in her name but from her daughter's postal address. Her daughter and son-in-law never admitted to any wrongdoing and nothing was ever proved, but it caused huge problems in the family."
When it comes to virtual friends, however, it's a different matter. New technology provides many other new opportunities for fraudsters where fake 'friends' can easily defraud you. Social media websites like Facebook have seduced people into giving away personal data without thinking about the potential consequences.
Even your date of birth and marital status can be used by a fraudster to kick-start a credit application. And by eavesdropping on conversations (if you haven't adjusted your privacy settings properly), they can glean a surprisingly large amount of data and assemble an identity.
Russell Day, head of identity crime for the National Fraud Authority, the government's anti-fraud umbrella group, says: "People have to start treating their ID as they would a valuable piece of personal property."
* Name withheld for reasons of privacy
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
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.