Upheld: Fraud reimbursement (APP scams) complaint against Modulr FS Limited

Decision detail

Summary

Mrs M was targeted by a sophisticated scam in November 2024 where a scammer impersonating her bank convinced her to move funds to her Modulr account and share OTPs to set up Apple Pay, claiming this was necessary due to a 'trojan virus' threat. The scammer then used the Apple Pay token to make payments totalling over £8,000. Modulr declined to reimburse, claiming Mrs M was negligent in sharing OTPs and had authorised the payments. The ombudsman upheld Mrs M's complaint, finding the payments were unauthorised as she did not consent to the individual transactions and did not meet the gross negligence threshold, as she was the victim of a sophisticated social engineering attack and reasonably believed she was resetting her existing Apple Pay. Modulr was ordered to reimburse the payments plus 8% interest.

The Ombudsman's reasoning

The ombudsman found that although Mrs M shared OTPs with the scammer, she did not authorise the individual disputed payments as she did not complete the procedure to consent to them. The scammer made the payments using the newly set up Apple Pay token. While Mrs M was careless in sharing the OTPs, this did not amount to gross negligence as required by the Payment Services Regulations. The ombudsman considered that Mrs M was the victim of a sophisticated scam involving social engineering, had been on the phone for over two hours, and reasonably believed she was resetting her existing Apple Pay rather than setting up a new device. The warning about 'ghost transactions' was given in the context of a virus threat, not as agreement to payments. Therefore, Modulr should reimburse the unauthorised transactions.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website