Upheld: APP scam reimbursement - irresponsible lending/failure to prevent fraud complaint against HSBC UK Bank Plc trading as first direct

Decision detail

Summary

Mr G paid £65,202.80 to builder firm P for loft extension work between July and October 2024, but discovered the project was a scam involving fabricated building inspectors, non-delivery of paid materials, and substandard work. First direct declined his reimbursement claim, treating it as a civil dispute. The ombudsman found Mr G was victim of a sophisticated scam with clear evidence including fabricated correspondence, doctored invoices, and court proceedings against the builder. Mr G acted reasonably in making payments based on meeting the builder in person and obtaining customer references. The ombudsman upheld the complaint and ordered full reimbursement of £65,202.80 minus £100 excess, plus £200 compensation and interest.

The Ombudsman's reasoning

The ombudsman was satisfied Mr G was victim of a scam rather than a civil dispute based on fabricated inspector correspondence, non-delivery of paid goods, and court proceedings against the builder. Under the CRM Code, Mr G had a reasonable basis for belief when making payments as he enlisted a registered company, met in person, obtained customer references, and paid in instalments. The warnings provided by first direct, while not specifically addressing builder scam hallmarks, were not effective warnings that Mr G ignored. Under the Reimbursement Rules for the final payment, Mr G did not fail to regard first direct's interventions with gross negligence. Therefore, no exceptions to reimbursement apply.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website