A widowed pensioner was terrified she would lose her house after three separate finance companies were duped into issuing loans under her name totalling $20,000.

The oblivious 78-year-old only learned she was liable for the fraudulent debts after one of the lenders registered a caveat against her humble Auckland property and another threatened to repossess chattels.

Shocked and distressed, the woman filed a police statement suspecting her grandson had used her driver's licence to successfully apply for the loans online through an elaborate identity ruse.

And despite a paper trail of evidence she says pointed to the likely culprit, just seven days later police said they were shelving the case because "we have not been able to find out who is responsible".

Two of the companies have now given written confirmation the woman will not have to repay the money, but only after intervention from the Weekend Herald.

She said her plight had exposed a gaping hole in security procedures for online loans, and whether other innocent people were falling victim because of what she believes is lax security and people's greed.

"They didn't do their job properly," she said.

The woman felt the "money-grabbing places are just looking for money" and she believed "they don't care how they get it".

The woman, a Justice of the Peace , lives frugally in suburban Auckland.

Heartland Bank says: "Sadly this customer is clearly the victim of an elaborate fraud." (Photo / File)

Earlier this year she received a call from Heartland Bank welcoming her as a new customer.

She had never heard of the bank and was shocked to learn it had issued an $8223 loan in her name in March.

A few weeks later a letter arrived in her mail box from Land Information New Zealand informing her Oxford Finance Ltd had registered a caveat against her house.

She later learned the finance company had issued a $10,000 loan under her name in April, which she had no knowledge of.

Shortly after that, a letter arrived from Alternate Finance Ltd in Christchurch warning an account under her name was in "arrears" with a balance owing of $1767.73.

Failure to make repayments would result in "extra costs and risk repossession of your chattels".

Suspecting her grandson, the woman launched her own investigation.

But she claims two of the companies refused to provide her copies of the loan application documents, and one wouldn't even confirm how much she owed.

After lengthy communications with Heartland Bank to prove she was not responsible for the $8223 debt, she received a letter dated May 5 from risk and compliance manager Annette Bryce confirming the bank had been duped.

"Both yourself and Heartland Bank have been the victims of 'Identity theft' by your grandson. Had [your grandson] not assumed your identify and fraudulently applied for this loan we both would not find ourselves in this position."

The letter offered no apology, but defended Heartland's processes, saying it was not uncommon for personal loans "to be transacted completely online with no physical interaction between the applicant and the lender".

The letter made no reference to whether the debt would be written off.

In a statement to the Weekend Herald, Heartland Bank refused to say what checks it made before issuing the loan.

It said: "Sadly this customer is clearly the victim of an elaborate fraud" and the bank was working to prosecute the alleged offender.

And to the woman's relief, the bank confirmed she would not be held responsible for the debt.

"In this application Heartland's legal and responsible lending obligations were met – including through the use of biometrics."

Oxford Finance is owned by Turners Automotive.

The company's CEO Todd Hunter confirmed the woman would not have to repay the $10,000 loan and that, following the Weekend Herald inquiries, the caveat had been withdrawn.

Oxford Finance Ltd boss Todd Hunter says: "We agree this is fraud and the matter is now with the NZ Police." (Photo / Supplied)

"We agree this is fraud and the matter is now with the NZ Police."

Hunter said the applicant for the loan had provided the woman's driver's licence and bank statements during the application process.

They also appeared to have faked a JP's signature verifying the application and had taken a photo of the woman which was then provided for a "digital identity check".

Fraud was an ongoing risk to the industry. While the company had security systems to protect customers, nothing was "foolproof", Hunter said.

"We can only do so much.

"We're as much a victim as she is. Someone has stolen $10,000 from us and it's very unlikely we're going to get that money back."

Hunter admitted the bank should have confirmed in writing it would not pursue the woman for the money, and withdrawn the caveat, before being approached by the Weekend Herald.

"That was a mistake on our part.

"Our intention was never to pursue her to the ends of the earth for that money."

Oxford Finance had now made a police complaint and passed all necessary documentation to investigators.

Christchurch company Alternate Finance refused to confirm whether the woman would be held financially liable. (Photo / Google)

Alternate Finance refused to comment, or confirm whether the woman remained financially liable.

Waitematā East Police acting Inspector Callum McNeill said police received a report about the fraudulent loans in May and conducted "a number of enquiries".

They had spoken to the woman, another JP alleged to have witnessed application documents, received documentation from Oxford Finance and investigated bank records.

As a result, investigators had identified "the likely individual involved".

"Police spoke with the complainant about progressing with a prosecution, however she expressed her wish to try and resolve this matter with the person who is known to her.

"Because of this, the person known to the complainant has not been formally spoken to by police."

Though the file was inactive, a prosecution could commence at the request of the woman or the finance companies, police said.

In a statement this week, police confirmed one of the lenders had now made a formal complaint and the file had been "reactivated".

The woman said her grandson had done wrong and should repay the money and face whatever consequences followed.

But she also blamed the three companies for allowing the loans to be processed, and failing to contact her directly to verify the applications.

"It would never have got this far if they hadn't allowed it to happen."

Massey University banking expert Associate Professor Claire Matthews says the lenders should do the right thing and wipe the debt. (Photo / Supplied)

Massey University banking expert Associate Professor Claire Matthews said the lenders should do the right thing and wipe the debt.

"They accept an element of risk. If that risk is realised then they have to wear the consequences."

Matthews was concerned it had taken media intervention for the companies to make clear the woman was not financially liable.

The fraud was "sophisticated" in evading the checks and balances in place.

She expected the lenders would now review their security settings to see what improvements could be made to prevent it happening again.