Identity fraud - the result of identity ID theft - is costing the UK economy a total of more than £1.7 billion a year Source Home Office estimates. In this guide you'll learn what steps you can take to protect yourself against ID theft and ID fraud. 

What is identity theft

Identity fraud - the result of identity theft - is defined as a crime in which a persons identity is stolen to support an unlawful activity.

The most common form of ID theft is credit card fraud estimated to have cost £423 million in 2006 Source APACS. This kind of identity theft began almost on the same day that banks first issued cards - in 1914 in the USA when Western Union began to issue metal cards that gave its preferred customers deferred payment options.

Plastic bank debit cards first hit the mainstream in the UK in 1967 when Barclays Bank installed the worlds first cash point in Enfield North London.

Using credit or debit cards when lost or stolen to gain access to strangers money is therefore the most traditional form of financial ID theft. Chip and PIN security introduced on 14 February 2006 has curtailed this fraudulent activity but simply stealing credit and debit cards and forging signatures is old hat in the world of ID theft.

The Identity Cards Act 2006 created offences relating to possession control and intent to use false identity documents. The Fraud Act 2006 created a new offence of fraud that is committed in one of three ways; namely making a false representation failing to disclose information and abuse of position. The Criminal Justice Act 2003 brought the penalty associated with fraudulently obtaining a driving licence into line with fraudulently obtaining a passport - and made both offences arrestable. The maximum penalty is now two years imprisonment.

Beware CNP card not present scams

CNP - card not present - fraud cost £212.6 million in 2006 Source APACS and accounts for around half of all card fraud. As the name would suggest CNP is when thieves acquire your bank details without your card. As consumers make more and more purchases and conduct their banking online CNP is increasingly carried out through computer hacking.

However ID fraudsters are not averse to getting back to basics either and will simply rifle through your outside dustbins hoping to find statements or receipts and lift your details that way. Once they have your bank information they can use it remotely to make purchases online by mail order or on the telephone.

Don't be caught by the Phishers

You can be tricked into entering your personal details such as password and PIN in response to a very realistic but fraudulent email from your bank. The equivalent scam can be carried out on the telephone.

Either way your bank will be the first to tell you it will never under any circumstances require this information through any medium - so dont give it!

Don't let your card be skimmed

Skimming is where during the course of a card transaction a corrupt shop assistant - or even a total imposter - will insert your card into a device that copies or skims the data that is held on it.

Once collected this information is usually sold on to third parties such as criminal gangs who create a clone of the card to use at will. Skimming devices have also been fitted to cash machines ATMs alongside miniature cameras that can record you entering your PIN. That's why youll see warnings on ATMs now telling you to check whether the machine looks as if it has been tampered with. Ensure you always shield the number pad with your other hand when keying in your PIN even if there is no one standing behind you.

What are the banks doing about ID theft

Banks have understandably been stepping up the security of their online banking facilities - see our guide to

Existing passcodes and memorable words are still employed. Most banks now remind customers about phishing scams as they log onto their online accounts. Raising consumer awareness is central to fighting ID fraud.

What should I be doing about ID theft

There is no blanket guarantee in The Banking Code that says your bank must refund fraudulent transactions on your account and even if it does agree there is no minimum time in which your account will be brought back to its original state. Thats why every consumer needs to take responsibility for their own ID security. ID thieves thrive on consumer complacency so first and foremost check your bank statements thoroughly.

Look for any direct debit you did not set up or any transaction you didnt make. If you never spot them you will be working to fund a criminal strangers purchases - infuriating!

It is also important to dispose thoroughly of any documents on which your bank details are written down. Bank statements and letters for example should all be shredded - both downwards and across. 

You can reduce the risk of computer hacking by locking your PC with a password. Make sure you change this password regularly to keep any potential fraudster on their toes - and dont use the same password for more than one account or mix them up with other websites.

In paper terms ensure that you contact the Royal Mail if you suspect that you are missing post - especially if it is from your bank.

Lastly its a good idea to obtain a copy of your personal credit file to see which financial organisations have accessed your details. It is particularly helpful to check your personal credit file two to three months after you have moved house.

What should I do if my credit cards are stolen

If your credit cards or debit cards are stolen you must get in touch with the card issuing bank or building society to cancel them the moment you realise they have gone. Your card issuer will be happy to supply you with a replacement card.

Death is no boundary to fraud

Criminals know no boundaries and can sometimes even use the identities of deceased persons to commit fraud which can be very distressing for the family.

One way of reducing the chances of this happening is to register with services that remove the deceaseds details from mailing lists.