This Fraud Awareness week, dispute resolution service, Financial Services Complaints Limited (FSCL), is warning consumers to file a police report as soon as possible if they have identification documentation stolen, following an increase in complaints from people who discover they have bad credit ratings, for loans they knew nothing about.

These credit ratings have caused problems for the unwitting consumer when they wanted to take out their own finance.

“In many of these cases, the consumer calls us because they discovered a bad debt listing on their credit report that they do not think belongs to them,” explains FSCL CEO, Susan Taylor, “The debt is with a company the consumer has never had finance with, and they want it removed from their name with the financial services provider and the credit bureau. In many cases the fraud has happened in the buy now, pay later finance agreements and/ or credit card lending.”

In one recent case FSCL investigated, Henare was thinking about taking out a loan, so he requested a copy of his credit file. When he looked at it closer, he noticed several loans and applications on his file he didn’t recognise. He realised he had been a victim of identity theft but had a hard time dealing the debt collectors.

To clear the fraudulent debt from his credit record, Henare had to make a complaint with the police, but to do this, he needed further information about the debt from the debt collectors.

He contacted FSCL because he was battling to get the details he needed.

We contacted the debt collectors and explained that Henare needed more information about the original loan to report the fraud to the police.

The debt collectors sent us all the details they had about the debt, including the original application details they received about the loan from the lender.

We passed all the details on to Henare. Henare then reported the fraud to the police and submitted a fraud report to the lender who passed this on to the debt collectors. As a result, the debt collectors waived the debt and removed the credit default.

We recommended that the debt collectors pay Henare some compensation for the inconvenience they had caused – it had taken months to supply Henare with the information he needed, and this only happened after we got involved.

Henare’s case is not an isolated incident. FSCL has received 30 complaints about fraudulent debt since January 2021, about half of these were within the last three to four months. This is an increase from the numbers seen during the same period last year, when only 12 complaints were made (and a total of 17 were received for the whole year).

‘’The consumer can see that some of the information beside the listing on their credit report does not match their personal information. For example, a different address or date of birth was used for the loan or credit application,” explains Ms Taylor.

“We also sometimes hear that the consumer had their driver’s licence stolen in recent years, so it’s possible that someone is fraudulently using their identity to apply for finance. Those who complain to us often feel that the financial service provider cannot have done their due diligence to confirm the identity of the person they were lending to.”

The bigger issue, Ms Taylor adds, is that consumers often first find out about the debt in their name when they are applying for a home loan and the bank will not approve the loan until the debt is explained.

“This is obviously very stressful when a consumer is trying to meet the finance condition of a home loan application. Fortunately, these complaints are usually resolved reasonably quickly in the financial service provider’s internal complaints process. However, this process could be expedited if the consumer has already reported the fraud to the police and is able to provide the financial service provider with a police report number.”

Once it has been determined that there is an issue of identity theft, the financial service provider removes the debt from the complainant’s name and requests that the credit bureau updates the consumer’s credit file.

“We do understand that for many consumers it can be frustrating to have to contact the police and they may consider it is the financial service provider’s fault for putting a fraudulent debt in their name. However, the best way to resolve the problem is to report any theft to the police and contact the company that the listing is with to dispute that it is their debt,” said Ms Taylor.

Another option is for the consumer to proactively check their credit report to be reassured that there are no false listings in their name.

You can read the case note here.

About FSCL

FSCL is an independent not-for-profit external dispute resolution scheme which provides dispute resolution services to participating financial service providers and their clients. The FSCL process focuses on resolving complaints through conciliation and assisted negotiation and is also able to make formal determinations which are binding on financial service providers. The FSCL process is free to consumers. For a list of FSCL’s participants and more information on FSCL visit www.fscl.org.nz . You can learn more about dispute resolution schemes in New Zealand by watching the following video: https://www.youtube.com/watch?v=KPQN_ajedxA

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