Online banks should tighten up ID checking procedures

We all read about identity fraud and scams, sympathise with those that get caught, but feel it must have been their own fault. I was no different, but it’s surprising I have time to write this column, having spent much of the past week sorting out having been the victim of identity fraud myself. ‘His own fault’, I hear you say. Well, I shred all documents, pay all bills by direct debt, have one bank account I’ve had since my student days, two credit cards I’ve had a long time, have good virus protection on my computer and have no reason to visit dodgy websites, which in any event the software blocks.

That made it a big surprise when I began to receive new account details from the TSB, Halifax and Nationwide, complete with overdrafts. Over the coming days came debit cards and details of how to use telephone banking services.

Surprisingly, if you want to open an account at a bank, even with your own bank, you have to prove your ID with a passport and one or more utility bills, but open an account online and no such documents are necessary.

If you receive anything odd from a bank, my advice is do not delay. To be fair, all three banks were great to deal with. Two – Nationwide and Halifax – had already blocked the accounts because they suspected identity fraud. This was after the accounts had been approved by computer. TSB blocked the account when asked to do so. This was no speedy process, and the question remains, how many accounts have been opened, and how did they get my name to do it? The how do they get your name and address is simple – it can be from the electoral or share registers. How they get details such as date of birth is less clear, and how many accounts have been opened takes you down another avenue.

Each time a credit check is carried out it’s recorded in your personal credit file with companies such as Experian or Equifax. Once you’ve finished fire fighting with the banks to close the accounts, your credit status is the next challenge. The more checks carried out, the more your status is damaged. Equally if you do not find out about the bank accounts a battle will ensue to prove the debts are not your responsibility. One worry is that armed with the account details people can open mobile phone or other accounts, which will not be paid.

That all meant I had to sign up to Experian, and they and others are great at restoring your credit status. They pursue with the banks the removal of the searches damaging your credit history. More importantly, they will also send an email alert each time a credit search is carried out in your name.

In my case the report showed the three accounts were all opened on the same day, but there it stopped, since the account details came to me by post. The aim with ID thieves, say the banks, is to move quickly when the accounts are opened and get hold of the post and the credit cards. The banks now have me registered with the CIFAS (Credit Industry Fraud Avoidance System) which means extra checks if credit is sought in my name. While the aim is to prevent further fraud it will also delay any request I make for credit, because identity checks will be necessary.

This all left me wondering why online banks have so few checks before agreeing an overdraft compared with High Street banks or building societies, especially as estimates suggest one in four people will become a victim of ID fraud, and it’s a problem that in the internet age is only going to get worse.

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