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Fraud on UK credit and debit cards has risen again, driven up by the use of counterfeit cards in foreign countries.The banking payments body Apacs says fraud abroad rose by 126% in the first half of the year, compared with the first six months of 2006.

That in turn drove up losses due to all credit card fraud by 26% to £264m.

Apacs says fraudsters are being forced to copy stolen cards and then use them abroad because the chip-and-pin system has made fraud in the UK harder.

“These figures show how the fraudsters have changed tack,” said Sandra Quinn of Apacs.

“A couple of years ago they were mainly stealing cards and card details for use in UK shops and cash machines.

“But today, because of chip-and-pin, they have been driven overseas - using fake magnetic stripe cards specifically in countries which have yet to upgrade to chip-and-pin,” she added.

Changing patterns of fraud

This latest trend appears to be reversing the drop in overall card fraud seen in 2005 and 2006.

Last year, losses suffered by financial institutions, retailers and individuals fell by 3% to £428m.

But as well as a surge in the use of counterfeit cards abroad, there has a been a rise in losses from fraud where the card is not present, such as online, phone or mail order transactions.

These have shot up by 44% to £137m in the first half of the year.

Apacs argues that this has been driven by the increasing volume of internet shopping.

The House of Lords is to make a decision with regards to credit card refunds for customers when they use their cards to make purchases abroad and goods are either damaged or not delivered at all.

Under the Consumer Credit Act the same level of protection applies as when goods are purchased in the UK, which means that customers are protected on purchases of between £100 and £30,000. However, this is being challenged by UK banks, with Lloyds TSB leading the argument against this level of protection on goods that are purchased from other countries.

There have already been High Court and Appeal Court hearings over this issue, and the banks are now asking for a final decision from the House of Lords. Banks claim that the system is unfair, and that they are being used as insurers for millions of suppliers around the world about which they actually know nothing.

Section 75 of the Consumer Credit Act, which came into force in 1974, states that credit card companies are responsible, along with the supplier, if goods bought on the card are damaged or not delivered. However, according to some industry officials there is confusion when it comes to goods that are purchased from another country, whether this is in person or via the Internet.

One official from the British Banker’s Association stated: “Clearly it is far more difficult for the lender, who can obtain redress in turn from the supplier, on the borrower’s behalf effectively, to do that overseas.”

One legal expert added: “More and more people are discovering those rights, and more and more credit card companies are becoming a little more worried about fraudulent clams.” 

The UK housing market is now showing signs of a significant slowdown according to a price survey based on official Land Registry figures.The FT House Price Index for September showed pries rose 0.3 pct from August, for an annual 8.8 pct rise, the lowest year-on-year rise this year and well below August’s 9.4 pct increase.

‘The continuing fall in both the monthly and the annual inflation rate was expected and begins to suggest we will now see a period of further reductions in the rate of price increases, following the broadly stable pattern which we have observed in the first few months of the year,’ said Dr Peter Williams, chairman of Acadametrics who collate the figures.

On a region-by-region basis the West Midlands and the North recorded the lowest annual growth rates of 4.4 pct and 4.7 pct respectively. Meanwhile, London continues to remain out of step from the rest of the UK, posting the highest annual growth rate of 17.2 pct, well ahead of the South West which recorded the second biggest increase at 9.7 pct.

Looking ahead, Williams said the slowdown is set to continue.

‘The expectation of a slowing market through the remainder of 2007 remains regardless of any decisions by the Bank of England,’ he said.

‘Indeed, the Bank’s previous increases in interest rates have now collided with the tightening in mortgage credit resulting from the sharp increase in mortgage arrears and repossessions,’ he added.

The trend of falling home insurance premiums has ended, due to heavy claims from the summer floods, according to the AA’s latest premium index, released on Monday.

The average quoted premium for home buildings insurance rose by 3 percent over the past quarter, the largest single rise since the index was launched in 1994, the AA said. Home contents premiums also rose by more than 2 percent during the period.

The cost of claims from the worst floods to hit the country in 60 years has forced insurers to push up premiums, said the AA, whose index is widely viewed as the barometer for the insurance market.

 The heavy claims bring to an end months of aggressive price cutting as firms tussled for market share. In the previous quarter the average premium for home buildings insurance was down nearly 2 percent, according to the AA.

Insurers face a bill of over 3 billion pounds from more than 130,000 claims that resulted from the torrential rainfall that hit central, northern and western England in June and July.

But predictions of price hikes of as much as 15 percent have proved unfounded, the AA said. Although premiums are likely to continue to rise, continued competitive pressure will keep a lid on the rises, it said.

Motor premiums continued the upward trend that began at the end of 2006, the AA said. The average quoted premium for an annual comprehensive car insurance policy in the last quarter rose by more than 1 percent, while the cost of a third party, fire and theft policy rose more than 3.5 percent.

Analysts and actuaries argue the cost of motor premiums must rise further, as premiums have not kept pace with the increasing cost of claims.

Insurers have opted to keep prices low and compete for market share by dipping into money from reserves that are no longer needed to pay claims, but as these funds are depleted then insurers will need to charge significantly more in future.

New fraud-prevention technology has made credit card crime more difficult in the U.K., but it is increasing in other countries that have not adopted “chip-and-pin” safeguards. Chip-and-pin credit cards are cards containing electronic chips that contain the information otherwise found on magnetic strips.According to the Association of Payment Clearing Services (APACS), the U.K. clearing service, credit card crime in the U.K. dropped 4 percent in the first half of this year, compared with the first six months of 2006. However, fraud on UK-issued cards, primarily in the U.S., rose 126 percent during that time. Chip-and-pin is not accepted universally, so cardholders’ names and account numbers, expiration dates, and security codes are still stored on the magnetic strip of a credit or debit card, as well as on the microchip.

Criminals are copying the data on the strip to create a fake card that is then used in a country that has yet to upgrade to chip-and-pin technology, the BBC reported. All European Union members plan to upgrade by 2010.

Fraud patterns are changing. Last year, losses suffered by retailers, credit card users and financial institutions fell by 3 percent. But this year the numbers are rising due to the surge of cloned cards in the U.S. and elsewhere, along with a 44 percent increase in online and telephone fraud for the first half of this year, reported.

The good news in the U.K. is that online banking fraud is down, thanks to chip-and-pin and other security measures, as are losses from stolen cards being used to withdraw money from cash machines, which is down by 57 percent. When it comes to transactions where the cardholder is present, fraud has fallen 11 percent, FinanceWeek
reported.

In a surprise move, Barclays has cut personal loan rates on many of its products. This follows recent rate rises by other lenders.

Certain loans have experienced rate reductions of as much as 0.6 per cent; the Barclayloan Plus product, available to existing customers, has seen its rates fall from a typical 7.4 per cent APR to 6.8 per cent.

Barclays says that’s it been able to advantage of its strong balance sheet, and finance loans from its ‘very strong deposit taking business.’

The bank has also sought to demonstrate its confidence in the competitiveness of its products. Investors have been assured that if they take out a Barclays loan and then find it cheaper elsewhere, the bank will pay the difference between the monthly repayments, plus an additional £1 per month.

The move comes after a month in which several lenders have raised the interest rates on their personal loans, in reaction to continuing uncertainty in the financial markets.

Moneyfacts.co.uk recently reported that nine lenders raised their interest rates last week alone, with some loans seeing substantial hikes. At Bradford & Bingley, interest on loans between £2,000 and £3,000 went up by four per cent, to 17.9 per cent.

Lisa Taylor, analyst at Moneyfacts.co.uk, explained that such rate rises “probably more closely reflect the current financial market”, with the previous, very low rates being “unsustainable” for the banks.

It’ll be interesting to see if any other high street banks follow Barclays and cut rates themselves.

New restrictions on lending to high-risk customers could lead to a surge in the numbers of people seeing their mortgage applications turned down, new figures revealed today.According to the new research from independent broker The Mortgage Lender, a quarter of all specialist and sub-prime mortgage applicants accepted in August would now be refused, following changes to lenders’ rules.

Mortgage experts said the new tighter controls on Loan to Value (LTV) and credit history were likely to have a significant impact on low-income families or borrowers with a poor credit rating trying to get into the housing market.

The U.S. has overtaken France as the number one place where fraudsters can convert U.K. credit and debit card details into cash, according to a U.K. banking trade group.To blame is the absence in the U.S. of “chip-and-pin” technology, where credit and debit cards with an embedded microchip are authenticated with a PIN (personal identification number) during purchases and cash-machine withdrawals, said Jemma Smith, spokeswoman for the Association of Payment Clearing Services (APACS).

As a result, fraud involving U.K. cards overseas jumped a staggering 126 percent for the first six months of this year over the same period last year, according to the latest figures from APACS, released on Wednesday. On a brighter note, domestic fraud conducted during face-to-face transactions fell 11 percent, the group said.

Criminals often commit fraud by copying the magnetic stripe on the back of a card and obtaining a person’s PIN. They do this by installing “skimmers” — unobtrusive devices attached to a cash machine that read a person’s card details, as well as using small cameras to capture PINs, Smith said.

But most U.K. banks block transactions on cash machines with cards that lack the microchip, which prevents someone from making a fake card with the magnetic stripe details captured from the skimmer, she said.

The U.S., however, has not deployed chip-and-pin technology, so criminals are capable of withdrawing money from cash machines there. In 2006, U.S.-based fraud using U.K. cards amounted to $34 million, Smith said.

Credit card users have been warned that instances of fraud relating to cards issued in the UK but used abroad are on the increase.

According to the UK’s payment association Apacs, fraud affecting British consumers while they are outside the UK has been increasing rapidly and rose by as much as 126 per cent during the first six months of this year.

And despite the fact that credit card fraud was reduce by four per cent in the UK during the same period, Apacs is keen to see British consumers take steps to protect their financial details more effectively.

Sandra Quinn, director of communications at Apacs, commented: “A couple of years ago [fraudsters] were mainly stealing cards and card details for use in UK shops and cash machines, but today… they have been driven overseas.”

“The banking industry also continues to work with law enforcement, card accepting businesses, the Home Office and organisations such as Crimestoppers to help deter and prevent the fraudsters,” she added.

Figures released by Apacs recently show that a record £321 billion was spent using credit and debit cards in the UK during 2006.

A recent report has shown that many consumers that use credit cards are still confused or even unaware with regards to the order in which the balances on their credit cards are repaid from the repayments that they make.

This is an issue that does not affect those that repay their card balances in full at the end of each month, but does affect those that make smaller repayments on their credit cards, often costing them a small fortune in additional interest.

Most credit card companies apply repayments to the balances with the cheapest interest rate attached rather than applying them to transactions in terms of date order. This means that balances with higher interest rates are left untouched for longer, and continue to rack up interest at extortionate rates in some cases.

The issue has already been brought to light in the recent past by campaign groups within the UK, but despite highlighting the issues these groups state that the repayment allocation of credit card balances is still causing confusion.

Because of the order in which repayments are allocated on credit card balances, campaigners state that even the best deals may end up being costly to credit card users that spread their repayments. These groups are calling for more transparency when it comes to providing information to credit card users about the order of repayment allocation.

One official stated: “With a complex issue such as order of payments, providers have a duty to explain clearly to consumers how the way payments are allocated impacts on their efforts to decrease their credit card debt.”

This method of repaying the cheapest balances first is known as an adverse order of repayments, and is used by many credit card companies in order to make additional money from customers in terms of interest.