Direct debit fraud at an all-time high; Bacs challenges figures
23 November 2010 | 21355 views | 4
Over 97,000 Brits have fallen victim to criminals setting up fraudulent direct debits from their accounts, with this number set to escalate over the next three years, according to research from insurance outfit LV=.
The study, conducted by the Centre for Economics and Business Research (CEBR), show that so far this year 26,000 Brits found fraudsters taking out regular direct debit payments in their name, with an average of £540 going missing before they noticed and stopped it.
Common examples of direct debit fraud include regularly recurring payments for gym memberships, mobile charges or TV subscriptions. In other cases, the fraudster will set up the payment to their own account but label it with the name of a commonly used service provider, leading the victim to think it's a legitimate payment.
Over the last four years, the number of criminals gaining access to victims' bank accounts directly in order to set up regular payments has risen by 288% from just 6200 reported cases in 2006.
Direct debit payment fraud now accounts for around 10.6% of all identity fraud cases, rising from 0.01% of all cases in 2001. And the LV= report reveals the problem is set to grow to 41,000 cases a year by 2013, equating to a 57% rise in the coming three years.
LV= puts the rise down to the credit squeeze and a criminal migration away from Chip and PIN-protected card channels. The boom has also been driven by the proliferation of online services, with fraudsters now able to set up contracts and other agreements without the need for stringent ID checks.
However, the data gathering exercise has been challenged by UK clearing house Bacs, which says it has been denied access to the methodology used by CEBR.
"Without seeing the report, it's difficult to comment on its contents, however, we question the validity of the data used to predict any future increases in incidence of directd debit fraud, particularly from two parties who do not have an industry-wide overview," says Bacs in a statement. "As we haven't been allowed access to the research, we don't know that the questions asked make clear what direct debit fraud is."
The ACH says its own research shows that only one percent of British businesses have experienced direct debit fraud, "and we have no evidence that this has changed markedly since that was carried out in July 2008".
Whatever, the true figures, LV= says the problem is being exacerbated by old or duplicate direct debits. Forgotten direct debits take bank account holders on average four months to notice and cost around £190 each time, according to LV=, with an estimated £385 million 'wasted' in unnecessary direct debits last year.
John O'Roarke, managing director of LV= home insurance, comments: "While most of us are aware of the need to protect our card details, the increase in fraudsters setting up direct debits in victims' names proves the need for everyone to regularly check their banks statements and ensure they're not paying out for someone else's mobile phone account or gym membership or any other direct debit they don't recognise."
Bacs counters that all direct debit instructions are protected under the terms and conditions of their use. "If a customer believes funds have been taken incorrectly from their bank account by direct debit, they should contact their bank branch immediately to request that the money be returned under the terms of the Direct Debit Guarantee."