Store card fraud takes off as banks tighten their security on credit cards

As banks tighten credit card security, fraudsters are switching to store cards, and the ease with which they are getting away with it is causing concern.

"It's just too easy for the crooks," says Oliver Martin, 30, a bank employee from north London. Mr Martin has good reason to be angry; he recently received bills for £700 worth of clothes and sports equipment he had not bought. "I got two bills about a week apart, one from Ciro Citterio [a clothes retailer] and the other from First Sport [a sports retailer recently taken over by JD Sports]. They were asking for £700 I had never spent," he says.

The goods were bought on store cards fraudulently taken out in Mr Martin's name by criminals using a stolen debit card. What has mystified him is that the debit card wasn't his. Neither was the name nor the birth date on the application. "I was amazed," says Mr Martin. "The only thing they got right was my address. Anyone can look that up in the phone book."

It is scant consolation, but Mr Martin is not alone. Identity fraud is the UK's, and the western world's, fastest growing white-collar crime. About £1.2bn was stolen by fraudsters in the UK last year and, according to Equifax, a company that tracks credit applications, some £228m was lost to card fraud alone.

Experts say store card issuers are finding the problem of controlling fraud particularly acute. Neil Munroe, external affairs director for Equifax, says: "There has been an increase in fraudsters targeting store cards. They are attracted by the instant credit, which allows them to turn credit into goods into money quickly."

Others blame the improved security measures of the banks for a migration of criminals to store cards. That migration threatens to become an exodus this summer with the launch of new credit and debit cards requiring customers to use personal identification numbers (Pins) rather than signatures. Sandra Quinn of Apacs, the banking industry body that oversees payments between banks, said: "The new pin system will wipe out almost all credit and debit card fraud in a stroke. It will inevitably put more pressure on other areas, as gangs look for easier targets."

The system is not being adopted by store cards. Apacs says this is because they do not have a central organising body and as their systems are not homogeneous it would be harder to put in place. The technology would also be expensive because of the smaller numbers of cards involved. Store card issuers are waiting to see whether the cost comes down and how successful Pins are at fighting fraud.

But store card companies are not ignoring the problem. In recent years all the larger issuers (there are 17 in the UK) have begun to use electronic databases to check customer identities before approving credit. Creation Financial Services (Creation), which manages store cards for 20 high street retailers including Ciro Citterio, Miss Selfridge and Warehouse, checks applications for credit against two databases. It claims investment in security has reduced fraud, year on year, in the past 12 months.

Yet in Mr Martin's case the security failed. He said: "I called the companies' fraud lines and was told they had already noticed that something might be wrong. They told me the crooks had applied using a debit card in the name of Martin Oliver (the reverse of Mr Martin's name) and that they had given a birth date from the Sixties."

Mr Martin was also told his credit record would carry a fraud alert, meaning new applications for credit in his name would undergo extra checks. Those checks will apply to applications by Mr Martin too. He added: "The companies were helpful; there was no suggestion I would pay for the goods. But it's a little ironic the criminals were able to get instant credit and I won't be able to."

Privately, store card providers say they would like to do more to avoid fraud, but have been frustrated in their efforts. In particular, they would like access to a database of stolen debit cards called the "hot-card file", which is held by the banks.

Some inroads have been made. A database tracking identities that have been used in past frauds is available to both banks and store card providers. Names on this database, like that of Mr Martin, are treated with extra caution by credit companies. Creation's figures suggest about 25 per cent of applications using names already used in a fraud turn out to be fraudulent.

But not everyone is convinced the problem lies with a lack of information-sharing. "Stores look at credit profiles in a different way to banks," says Mr Munroe. "As their interest is in approving cards to facilitate purchases, the cards may be easier to qualify for."

Experts admit there is little that people can do to protect themselves completely from fraudsters. Keeping documents such as passports, utility bills and driver's licences safe will reduce your chances of being targeted, as will destroying personal information contained in letters before throwing them away. Most important, though, is reading bills and bank statements carefully and reporting suspicious activities immediately.

The good news is that where fraud is reported, and can be reasonably proved, the card issuer will absorb the cost. But Bruno Rost, of the credit checking company Experian, warns: "Lenders pass that cost on through charges and interest, so we all pay in the end."