The Financial Services Authority (FSA) has questioned the real value of holding identity theft insurance after it launched a review of CP, one of the largest theft policy providers that have now been accused of miss-selling its products.
The FSA stated that it was very concerned about the way that the CPP marketed its policys to customers. In particular, they were not happy with the way that the CPP identified different levels of risk for different economic situations. Boss of the CPP, Paul Stobart stated that the requirements set by the FSA are not proportionate and could ruin the firm.
Identity theft is a very serious matter given the fact that once a thief has your identity they can easily use it to apply for credit in your name, as well as purchase services and goods using your name.
This means that in the future you could have problems with getting credit and see your limits decrease because of a poor credit profile. In addition, you may end up with bills that are legally your responsibility even though you had nothing to do with creating them in the first place.
New data from CIFAS, the fraud prevention service, now estimates that identity fraud is the main cause of over 113,000 fraud cases. Fraud has also increase 10% since 2010. Due to the rising number of fraudulent acts and the high risk of actually becoming a victim of identity theft it is easy to see why people would want to purchase insurance against this type of theft.
The cover is estimated to cost only about £50 to £80 annually and can help rebuild your credit. Campaigners, on the other hand, warn that this may not be as great of a deal as it looks. Which? member Richard Lloyd stated that their research shows that insurers and banks are the worst offenders when it comes to offering credit products that are actually very low value. He added that some of these policies you would never even be able to actually use.
For this reason, the consumer group recommends that consumers avoid ID theft insurance. At the same time, it is important to remember that banks actually legally have to refund losses if you are the victim of credit theft, so paying someone else for protection is actually useless because you will not receive two refunds.
Moneynet.co.uk employee Andrew Hagger stated that banks must reimburse their customers because of the Banking Conduct of Business Rules and the Lending Code, therefore, the average consumer will never likely use an ID policy even though they pay every month for it.
Instead, he said that these providers simply use people’s fear of the unknown and credit fraudsters to get them to buy a product that is virtually useless in most instances. He added that even if someone else does take out credit in your name you do not have to deal with the lender although it does take some time to sort out the issue.