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Identity theft victims left in black hole

If a fraudster takes out a loan in your name you cannot complain to the Financial Ombudsman Service (FOS). Worse still, the lender can chase you for payments, we can reveal.

Identity theft victims left in black hole

If a fraudster takes out a loan or credit card in your name, you can not complain or seek redress from the Financial Ombudsman Service (FOS) and the firm can continue to chase you for outstanding payments, the Financial Services Authority (FSA) today revealed.

In order to make a complaint to the ombudsman you must be ‘a customer’ or ‘potential customer’ of a firm. If you are the victim of identity theft however you may technically be neither. The FOS is therefore unable to deal with any complaints from people who feel they been unfairly treated by the firm in question.  

Yet, according to the ombudsman, consumers often complain that firms continue to wrongly hold a person liable for a loan, even after it has become clear they were the victim of identity theft or mistaken identity.

The rule in action

In a recent court case – Goff v FOS – Mr Justice Langstaff upheld the FOS’ refusal to deal with a complaint related to identity theft on the basis that the victim was not an eligible complainant.

The claimant said she had been the victim of a number of identity thefts which exposed her to claims that she owed considerable amounts of money to a number of different firms – one of which was a £10,000 credit card debt with MBNA.

She sought redress from the ombudsman because she was worried about two things: that she would be chased by debt collection agencies for debts she did not owe; and that her credit rating would be ruined because it looked as though she was refusing to repay money she owed. The ombudsman, however, refused to handle her complaint because she was not a customer of MBNA.  

Mr Justice Langstaff said: ‘It seems to me, therefore, obvious that the rules cannot be construed to make the claimant, whatever the justice of her case may be, fit within the definition of eligible complainant'.

A spokesperson for MBNA said: 'If any of our customers are the innocent victims of fraud then they will not be held liable for any losses on their account. However, in this case, we believe that the card had not been fraudulently applied for'.

An exception

There is a small exception, according to the FSA. If the firm uses a debt collector, covered by the Consumer Credit Act, to reclaim the money owed under a regulated consumer credit agreement you can complain to the FOS about the actions of the debt collector.

But this does not offer any protection to people being chased by an FSA regulated firm – only Office of Fair Trading (OFT) regulated firms.  

What’s more, the FSA said, if the debt collector is attempting to recover payments under a ‘regulated mortgage contract’, you can not complain because they are not covered under ‘regulated consumer credit agreements’.

More investigation needed

Mr Justice Langstaff observed that the ombudsman seemed uncertain as to its authority in this area.

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28 comments so far. Why not have your say?


May 27, 2011 at 18:17

I'm confused. If the FOS says she is not a customer of MBNA how come she owes MBNA money?

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John Dunning

May 27, 2011 at 18:46

Consumers should be able to put a Lock on their credit file such that any application for credit would fail.

The response back should be the same as for bad credit, so that the criminals would not know the difference.

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May 27, 2011 at 18:48

Similarly confused. If the bank says she is a customer because it says that the card was not fraudulently applied for, then why is she not a customer according to FOS?

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Stanley Spencer

May 27, 2011 at 18:56

I have been wondering how I might get a really bad credit reference so that noone will give me credit - any bright ideas?


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John Dunning

May 27, 2011 at 18:57

Surely the letter from the FOS stating that she was not a customer should be treated by the creditors as a finding!

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White Stick follower

May 27, 2011 at 19:02

A simple security solution would be for the Credit Reference Agencies to hold secure details of ,say, an individual's 'phone home number and, perhaps a security question( not mother's maiden name) and to notify the ostenisble credit claimant of the credit application for verification that the loan, card etc applied for is authentic. Certainly two of my Credit Card issuers contact me immediately if a transaction appears on my account, or in some cases a trader is requesting authorisation of a large amount which does not fit my normal profile. This is not a matter upon which this judgement specifically deals ,but it does seem a simple anti fraud measure.

The postings above are quite reasonable and identify an obvious contradiction - when is a non- customer a customer?

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G S = Go Short

May 27, 2011 at 19:04

Another case that proves the law is an ass.

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alan gray

May 27, 2011 at 19:34

I feel this reflects very badly on MBNA.

I thought MBNA was part of Bank of America.

Does Bank of America know what is going on????

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John Dunning

May 27, 2011 at 19:50

They are a bank. If wikileaks are to be believed then read this:

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Robin Cregeen

May 27, 2011 at 19:57

I would agree with Martyn. If MNBA are allowed to chase her for the debt, she is surely a customer! Hence she should be able to complain to FOS. conversely, if MNBA argue she is not customer, how can they chase for debt! It strikes me someone has erred on a point of law

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May 27, 2011 at 20:19

The FSA ombudsman frequently ignores the law to preclude it investigating one pf its paymasters.

I have it writing from the FSA that it doesn't have to follow the law. What value the treaty of Brussels that judicial bodies (and the FSA is one of them) must have proper procedures.

So, if MNBA claims the lady is a customer, how can they (FSA) maintain a claim for money due and should not the FSA bar the 'member' from maintaining a fictitious claim? Answer, the FSA rewrites the law to suit itself/members, to hell with the great unwashed from being harassed by its members. Does this not allow its members to make fictitious claims and the FSA will stand to one side and not stop this illegal conduct (which it is supposed to prevent)? Does that mean that the FSA stands for Financial Shafting Authority?

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Chris Kenney

May 27, 2011 at 21:21

Most government created watchdogs are a wast of time.

Yes Snoekie, FSA does stand for financial shafting. We all learnt that during the mortgage endowment scandle.

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paul mackintosh

May 27, 2011 at 21:56

John dunning has the right idea, but why not make people set up a password as well so thAt they have to give this as well to get any form of credit, very simple to enforce and adds an extra form of security.

I live in Spain and have property that i let out in the Uk and every time I get a new tenant im worried that they will take out credit in my name and blacklist my address, this would be a great safe guard why has it not been introduced.

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Ian Phillips

May 27, 2011 at 22:00

......and so it continues, the only body that should be in court is the FSA, part of of Gordon's tripartite protection system that allowed the country to go into financial meltdown........maybe "only" is a bit narrow, there are a few more that qualify!

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Going loco

May 27, 2011 at 22:49

It is amazing how the country I grew up in has gone from being one where financial probity was the norm, and fraud on an intelligent private citizen was difficult to perpetrate, to a cess pit of skulduggery and malfeasance by public bodies and banks who are too big to fail and who therefore can do whatever they damn well like. If the banks and the FSA really wanted to stop fraudulent credit applications based on identify theft they could do it within weeks. Some of the suggestions here would form part of the firewall they could set up. I blame the Bank of England for all this. The only good thing I can say about Mervyn King is that he tried to stop Gordon Brown emasculating the Bank of England's supervision of the banks; on the other hand instead of doing the honourable thing and resigning when he lost the fight he stayed on and watched the whole system fall apart on his watch. The increase in identity theft is just one more example of a financial system that is riddled with corruption and is gradually impoverishing the people of this country, while the likes of Mervyn wring their hands and hang on to the day when they can collect their inflation-proof pensions.

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May 27, 2011 at 23:34

Labour and the FSA may be responsible for the stupid and damning legacy that proved to be a catastrophe for the country but surely neither are responsible for the identity theft of this unfortunate lady.

By the way I vote to keep King since he was the only level thinking candidate of the last era to come through with any integrity.

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Going loco

May 28, 2011 at 08:28

john_r - Labour and the FSA are responsible for creating a system which condemns people who suffer identity theft to a Kafka world where they are at the mercy of the bankster system, and where the rest of us live in fear that we will be the next to have our IDs stolen. And King is at fault because he saw the mess that would result from Brown's policy but as I said above he didn't do the honourable thing and resign, he kept his job and watched the mess unfold whilst making oblique references to flat champagne which did nothing to stop the idiocies. Yes he has a reputation as a level-thinking man, and I think he is very clever, much cleverer than I am, but he should have resigned when he realised that the Bank of England's supervisory role was being handed over to an incompetent organisation.

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May 28, 2011 at 10:50

Yet another frightening example whereby successive British governments have failed to fullfil their first legal duty -to protect its citizens and their property. The disconnect between politicians and the voters has to be at an all time high.

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an elder one

May 28, 2011 at 13:15

I am afraid that this sort of behaviour is all too common in business and walks of life nowadays; to my mind it comes about as a result of the State's attempts to micro-manage all aspects of personal conduct and practice by laws, which are often fatuous, equivocal and ofttimes downright contradictory. This has replaced the proper morality and ethical behaviour and the exercise of fair considerate judgements by people in all cases face to face, by mechanical rules of procedure in cases of appeal that eventually come under the scrutiny of various agencies whose judgements are based on the semantical interpretation of those rules and influenced by considerations of their own vested interests.

Those laws written today relieve individuals of the requirement to apply innate honesty by what one can get away with by means of loopholes. Fortunately there is still some honesty to be found in society.

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an elder one

May 28, 2011 at 15:02

Why do we need all these government arranged agencies, FSA, FOS, Quangoes, etc, who ever claim it is not their responsibility when it comes to the crunch - in fact they are a result of the State's attempt to control everything in response to the people's mantra 'the Government should do something about it' when in fact the less they do, the better - we shouldn't complain when we get what we ask for, I deem.

Surely though, such problems described here could be judged by the courts if it were made less problematical; we don't need pseudo courts of law run by amateurs with their debatable responsibilities, judging the issues of contracts, one would think. Still I'm just another potential victim with no expertise of these matters - incidently, I am a reluctant holder of an MBNA credit card, thinking they were not the worst of a bad bunch.

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Robert Morfee

May 28, 2011 at 16:22

Victoria helpfully provides a link to the judgement, which, if you read it, makes perfect sense.

As Ms Goff's case is she was not a customer of MBNA, she can't at the same time be a customer for the purpose of conferring jurisdiction on FOS. She has to be a customer for FOS to adjudicate at all.

What puzzles me is why Ms Goff thinks FOS capable of adjudicating on this at all. FOS takes no evidence, and has no way of telling truth from falsehood. In any case where" fraud or no fraud" is the central question, FOS is utterly at sea and hopeless.

If legal proceedings are desired, Ms Goff could run a claim in the County Court for a declaration that she did not borrow the money, or for the libel in saying (perhaps to credit reference agencies) that she did and won't pay.

But the obvious strategy is not to pay and wait for MBNA to sue or give up.

Robert Morfee

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an elder one

May 28, 2011 at 23:13

Presumably, if someone has borrowed this money then they have purchased goods or converted it into assets of some kind, surely this or these transactions are traceable, whether by the internet or face to face - bearing in mind all the surveillance kit we have about the place - and their true customer identifiable; there would appear to be a role for the police in serious cases. One would imagine that the courts would require such evidence in order to exercise a judgement.

Question is, does MBNA have to prove it's case, or must their alleged customer prove their innocence. If the former, then the alleged customer, if indeed they are innocent, can ignore the matter; as Robert Morfee suggests.

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Going loco

May 29, 2011 at 17:34

@ an elder one - It is my understanding that it is extremely difficult to persuade the police to investigate any allegation of identity theft or to treat as an offence the loss of funds following identity theft unless and until an organisation such as a bank makes a formal request for an investigation. In other words if an ordinary member of the public contacts the police to allege that their identity has been stolen the police will usually decline to investigate. Does anyone know any different?

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May 30, 2011 at 10:02

I'm also very cynical about regulators for other areas, particularly telecomms. There are two organisations Oftel and Otello, whereas there is only a need for 1. With two, they can say the matter belongs to the other, according to their "terms of reference". If you do complain, you have to first compain to the company, and then allow a ridiculous time for the company to resolve the complaint. Only then can you officially approach the regulator, if the type of complaint falls under their terms of reference. Here they are usually toothless, although recently talktalk was fined a moderate amount. I actually received a compensation of £75 from Talk/talk Tiscali aftter giving Oftel/Otello a whole list of complaints about the way this company treated me as a customer. However, bearing in mind the stress and letter writing time it took me, firstly to the company, then to Oftel, then to Otello, the compensation should have been in hundreds of pounds rather than £75 they were required to pay. It probably took me 3 to 4 hours of my time. It was a waste of highly paid regulator's time and even some of Talk/talk's time too, so if the compensation had been realistic, it might have saved everyone money, by being more effective at making the company treat it's customers better.

Changing telecomms provider ought to be a simple seamless process, as it can be all done by simple efficient "paperwork" and computerised flicking of switches. Sending bills to people after they have changed, or having bill overlap periods where you pay two suppliers ought to be simply impossible, with even the simplest of billing software. The fact that it still isn't simple means that the regulators either lack power or that they are inefficient.

Changing energy supplier is still a lot easier

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Anonymous 1 needed this 'off the record'

May 30, 2011 at 11:05

I favour the centrally, securely held block on all applications with a password to allow it to be overridden. Does anyone know how to forward this debate to their MP? If they got a flood of complaints they might do something? On second thoughts that may be questionable, but surely better than nothing?

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Anonymous 1 needed this 'off the record'

May 30, 2011 at 11:17

Whoops!, I didn't realise how simple it is! Just click on forward and put your MP's e-maill address. I bet you think I'm a right plonker - I plead old age! I have sent it to my MP and await his answer with bated breath!

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an elder one

May 30, 2011 at 16:44

To my mind departments such as the FSA or FOS - why are two needed anyway - should only be an enabling agency, there to put inexperienced and frantic victims into the right channels to pursue their grievances; a sort of brokerage. Whether the the police like it or not, they are clearly the agency to investigate criminal activities; they need bringing up to date like so many other so-called public services in this the cyber age; same goes for the courts.

Furthermore, it seems to me that the likes of the FSA and FOS, etc are only invented by politicians so as to appear to be 'doing something' in the public interest, whereas of course they have NO EXPERIENCE of how to formulate such and don't give 'a monkey's' anyway. Someone there needs to sit down for 6 months and come with a positive blueprint to resolve the matter, I deem.

Surely the money saved by closing down the likes of the FSA, et al could be better spent on bringing about an improvement in police culture/procedure, etc.

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an elder one

May 31, 2011 at 13:55

A suggestion; make the FSA/FOS - whatever - a department of the police for such matters, they then judge each case on a value basis; if they deem that the amounts involved don't justify the cost of pursuit, they instruct the bank to take the loss - the bank retains the option of calling the police to take up pursuit - if the amount is large then the police pursue the case as necessary.

The public should not be left to pursue redemption on an individual basis, afterall it is the banks that issue the loans and payment cards and thus it is up to them to provide proper security in all cases; they do these things for their own profit and must take the risk involved.

I daresay that such is not an easy resolution; I'm blowed if I can understand how matters of identity theft arise, but clearly it does occur. Some individuals of course have the wit to deal with these problems themselves, but a proper agency with 'teeth' is needed for most citizens, to remove their anxieties and promptly root out the criminals.

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