How to fix your finances after fraud

Another week, another disturbing report on the rise of fraud and cybercrime.

Last week, the UK’s financial regulator, the Financial Conduct Authority (FCA) revealed the number of possible investment scams reported was up by almost a third last summer compared with the year before to 16,400.

Cryptocurrency, boiler room, recovery room, even FCA-impersonation were among the most common.

So serious is the problem that one in four new entrants is now being stopped due to concerns over their legitimacy, the regulator has revealed, but commentators warn it’s a drop in the ocean.

“Any win over fraud should be celebrated, but the harsh reality is it remains difficult to stay a step ahead of ever evolving financial scams,” says Myron Jobson, senior personal finance analyst, for investment platform interactive investor.

“The challenge is uprooting shady businesses and outright scam ventures before they have the opportunity to do harm to consumers.”

Meanwhile, the first six months of last year saw an 11 per cent increase in identity fraud, according to the National Fraud Database (NFD).

And recent work by TSB found impersonation scams recorded the biggest proportion of total losses due to fraud (43 per cent).

In fact, comparison site money.co.uk calculates that a total of £2.4bn was stolen from UK consumers in 2021 through fraud and cybercrime, with more than 445,000 cases. That’s up a staggering 174 per cent in a year.

These figures only represent the actual or possible scams that have been reported, too, and yet this is one of the most seriously underreported kinds of crime, so the chances are the real numbers are significantly higher.

Nor is the effect on the victim often short-lived. It’s rarely a brief inconvenience before being sorted out and our losses reimbursed by our banks. The impact on an innocent victim can last for years, even a lifetime, as savings are raided, fraudulent accounts set up and credit scores trampled.

So if you are affected by a scam, what can you do to fix your finances after the event?

The first, vitally important, action is to report it.

Some estimates suggest that only 15 per cent of instances of fraud are reported every year, often because of stigma or even embarrassment.

But failing to report the incident means your lender, bank, or credit reference agency could be unaware of the issue, may take no action and leave the responsibility for losses and further complications at your own door to fight alone.

Speak to your lender or bank to immediately cancel or freeze accounts so that cards can be replaced and potential unauthorised transactions investigated.

(Remember that if you’re unhappy with the response or advice from your provider, and they have failed to deal appropriately with a complaint, you can escalate that complaint to the Financial Ombudsman Service for resolution.)

You also need to report the situation to the three main UK credit reference agencies – Experian, TransUnion and Equifax – as quickly as possible. Finance broker Norton Finance warns that it could still take six weeks for data to be amended on your credit report, but fixing your credit report is a crucial step.

After an instance of fraud, a Cifas marker, which has no negative effect on your credit score, will be placed on your credit file for 13 months.

Cifas is the independent organisation tasked with reducing fraud and related financial crime in the UK, and the market indicates that extra, manual checks should be made before future credit is approved to help reduce the chances of a fraudster taking a loan in your name.

You could also add a fraud alert to your credit file, making lenders aware that they should verify your identity before offering credit. Norton Finance also suggests adding a notice of correction password.

This extra safeguard means potential lenders have to request the password from you to ensure you’re the real applicant.

Once you’ve dealt with the immediate fallout, you’ll need to address your credit score, as it may have taken a hit if you have missed payments.

But rather than paying a third party credit repair firm, you can do it yourself by prioritising debts and staying within your credit limit, setting up automatic payments and getting your payment record back on track.