Banks have been accused of profiting from fears about identity theft to push their protection policies on hard-pressed customers.

High street banks and credit card providers are promoting identity theft protection plans that cost up to £83 a year. Staff at Barclaycard recently told one customer that there was a one-in-four chance he would be a victim of identity theft.

Experts say this is simply not true. This week Cifas, the UK's fraud prevention service, announced that the number of proven cases of identity fraud had fallen for the second time in a year. Its latest figures show 28,500 victims in the first six months of this year, compared with 33,466 during the same period in 2007.

Richard Hurley, of Cifas, says: “This seems to have similarities with payment protection insurance, when banks were accused of using figures and stories as a scare tactic to encourage people to buy insurance.”

Mark Bowerman, of Apacs, the UK trade association for payments services, believes that many of the statistics surrounding identity theft are confused with general fraud.

While the rates of identity theft have fallen, internet, mail and card fraud have continued to rise. Last year the number of cases jumped 6 per cent, costing £327million. These figures include cloned cards and stolen card details being used to make purchases, often online.

However, Cathy Neal, of Which?, the consumer organisation, says that at a time when living costs are rising and families are feeling the pinch, these protection policies are an unneccessary expense.

She says that victims of fraud are protected from any financial loss by the Banking Code. “If people are vigilant they can put a stop to any bank fraud quickly and are unlikely to suffer financially. In most cases victims get their money back.”

Barclaycard Identity Protection, a typical scheme, costs £69.99 a year and includes £60,000 of insurance towards the costs of clearing your name. Subscribers also get unlimited access to their credit report, and mobile alerts when changes are made to their credit report. Also included is an online data patrol service from Garlik, the company that can track personal information held on websites. Alliance & Leicester offers a similar package, excluding the Garlik tracking service, for £59.99.

CPP, an insurer, provides the identity protection policies for Barclaycard and Alliance & Leicester. It also sells its own version through its website for £69.99. Halifax charges £83.40 a year for its Identity Care policy, while this week American Express launched a similar product called Identity Defence, also costing £83.40 a year.

Richard Dawson, 86, of Charmouth, Dorset, called Alliance & Leicester to register a new debit card that he had been sent through the post. The accompanying letter said that he needed to do this before he could use the card.

“When I phoned I became embroiled in a long conversation on the subject of identity fraud and was offered the insurance. I refused point- blank. I don't think it's necessary.” Mr Dawson was particularly annoyed because his call was to an expensive 0870 number.

ID protection policies do not claim to prevent fraudsters getting hold of your details. Instead, they put forward features to help you to spot abuses more quickly, such as unlimited access to your credit report.

However, Which? and Apacs recommend checking files held by each of the main credit reference companies only once a year. But you do not need to sign up to expensive subscription services to do this - Experian, CallCredit and Equifax must provide you with a report for £2.

Identity protection also promises insurance to cover any legal costs. Ms Neal suggests that this too is unneccessary. “It's highly unlikely that you will need to take legal action as the result of identity fraud,” she says.

Tony Neate, chief executive of Get Safe Online, the government-backed identity fraud awareness campaign group, believes that the fear of identity theft is worse than the reality. “I'm not so paranoid that I check my credit report every week,” he says.

Mr Neate says that if you take simple steps to protect your personal data, you mitigate against the chances of being a victim (see box, below). “People should be careful with their personal data, and take precautions. I look through my credit-card statements, for example, and make sure that I protect my personal details.”

If you believe your card details have been stolen, you can sign up to the protective registration service provided by Equifax, the credit reference agency, for Cifas. It places a warning on your credit file, reducing the risk that fraudsters will be able to open accounts in your name. The service costs £14.10.

Code of conduct

Under section 12 of the Banking Code, customers should not be expected to shoulder the cost of fraudulent activity on their accounts, unless the bank can prove that they have not taken sufficient steps to protect their personal details, such as their PIN.

There is no limit to the amount that banks are expected to compensate customers who have been a victim of fraud. But you must alert your bank as soon as you suspect your bank cards are lost or stolen, as you may be responsible for any losses that occur before you report them missing.

The code also requires customers using internet banking services to keep up-to-date anti-virus and firewall protection on their computers.

Banks, building societies and organisations that provide banking services in the UK subscribe to the code. For more information, visit bba.org.uk

Case study - 'Pushy and forceful' sales pitch

When David Spens received a replacement Barclaycard by post, it was covered with a sticker asking him to call a telephone number to confirm that it had arrived. When he got through to the customer services centre, a member of staff began a conversation with him about a product called Identity Protection, costing £69.99 a year.

Mr Spens, a retired barrister, was warned that ten per cent of adults have had their identities stolen and that one in four adults would become a victim of identity theft this year. He found the sales pitch “pushy and forceful”.

The 65-year-old, who has been a Barclaycard customer for more than five years, says: “I told him that if he was trying to scare me into buying Identity Protection it wasn't working. I made it quite clear that all I wanted to do was say that I had received my replacement card.”

After refusing to purchase the policy over the phone, Mr Spens was directed to a website operated by Experian, the credit reference agency.

The Barclaycard customer-service staff member then asked if he would, instead, be interested in insuring his debit and credit cards.

Mr Spens keeps his personal details secure. He shreds financial documents and keeps the security software on his computer up to date.

Barclaycard says that the statistics used by its customer services agent are not part of its official training.

How to protect yourself from fraud

PROTECT YOUR PIN - shield your PIN from other shoppers at tills and cash machines. You should also change it regularly, avoiding recognisable sequences or dates and, crucially,

never write it down.

SELECT SECURITY WORDS CAREFULLY- don't use your mother's maiden name as a password. Security experts advise that you choose words that are not familiar names or places, and that you include a combination of letters and numbers.

Which? says that if your bank or building society asks you to use your mother's maiden name, it may be safer to invent a new one.

BE VIGILANT WITH STATEMENTS- read your bank and credit card statements every month. Fraudsters can use your card details to pay for small, as well as pricier, items, so you must check your statements carefully. If you see an unfamiliar transaction, contact your bank immediately.

GET SHREDDING- criminals can obtain your personal details by rummaging through your bins to find credit card statements or bank account details. Reduce the risk by shredding all your important documents. A basic shredder costs £7.99 at Argos, or £13.99 at Staples. Lesley McLeod, of the British Bankers Association, says: “People need to be sensible and dispose of bank statements in a secure way. I shread mine and then put them in the composter.”

Make sure, too, that you cut up old credit and debit cards before you throw them away.

REDIRECT YOUR MAIL- the Home Ofice recommends that you use the Royal Mail's redirection service for at least a year after you move house to ensure that your post does not end up in someone else's hands. Call the Royal Mail on 0845 7740740, or visit its website (royalmail.com) for more information. If you think your mail is being stolen, call Royal Mail to ensure that a redirection order has not been set up in your name.

CHECK YOUR CREDIT FILE- look at your file annually to ensure that no one else has applied for credit in your name. You should contact the three credit reference agencies - Experian, Equifax and CallCredit.

BE SUSPICIOUS OF E-MAILS- beware of phishing e-mails that appear to be from banks, or websites, such as eBay, asking you to confirm security details including passwords. Neither your bank nor eBay would ever ask you to confirm personal or security information this way. Likewise, never open links in unsolicited e-mails. Clicking on these can download viruses directly to your computer.

STAY SAFE ONLINE - if you use internet banking, make sure that websites display “https” on the address bar (rather than just “http”) and a padlock symbol appears at the bottom of the screen. Both these prove that you are securely connected to your bank's website.