Not upheld: scam protection and fraud recovery; chargeback and Section 75 protection complaint against Nationwide Building Society

Decision detail

Summary

Mr S was scammed by a fraudulent travel agency website and made four credit card transactions through Nationwide. Nationwide refunded three transactions but declined the fourth, arguing Mr S had authorised it. Mr S complained that Nationwide failed to protect him from the scam and assist in recovery. The ombudsman found that the payment was authorised (Mr S entered the one-time passcode while misled), the transactions were to legitimate businesses showing no unusual patterns, and Nationwide took appropriate recovery steps through chargeback. The chargeback failed because the merchant provided a service, which is a valid defence. Section 75 protection did not apply due to a broken debtor-creditor-supplier chain. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied the legal starting position that banks must process authorised payments in accordance with Payment Services Regulations. Although Mr S was misled, he authorised the payment by entering the one-time passcode, making him presumed liable. The payments were to legitimate businesses and did not present unusual or out-of-character activity that would have alerted Nationwide to potential fraud at the time of processing. Nationwide took the appropriate recovery step by raising a chargeback, but this failed because the merchant legitimately provided a service (albeit not to Mr S), which is a valid defence under chargeback scheme rules. Section 75 protection did not apply because there was no valid debtor-creditor-supplier relationship—Mr S's contractual agreement was with the scam merchants, not the genuine travel agents.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website