Not upheld: Authorised Push Payment (APP) Scam - Reimbursement Claim complaint against Lloyds Bank PLC

Decision detail

Summary

Company A, through its director Mr M, claimed that Lloyds Bank should reimburse £62,940 paid to company S for HMO conversion work between January-August 2023, alleging S was a scam. S ceased work in September 2023 and subsequently went into liquidation. Mr M argued that the pattern of escalating payments, S's financial collapse, police investigation, and liquidator's findings of potential misconduct demonstrated fraud. The ombudsman rejected the claim, finding that the purposes of payer and recipient were aligned, work was completed, and the situation constituted a breach of contract or poor service delivery rather than an APP scam under the CRM Code. The ombudsman noted that a police investigation alone does not establish fraud on the balance of probabilities, and that business failure does not automatically indicate fraudulent intent.

The Ombudsman's reasoning

The ombudsman applied the CRM Code definition of an APP scam, which requires either deception into transferring funds to a different person, or transfer for fraudulent purposes. The ombudsman found that Mr M's purpose (property conversion work) and S's purpose were aligned at the time of payment. Although S completed some work, the ombudsman noted that businesses can fail or breach agreements without this constituting fraud under the CRM Code. The existence of a police investigation, liquidation, and potential claims against directors does not establish that S took payments with fraudulent intent on the balance of probabilities. The ombudsman distinguished between breach of contract/poor service delivery (not covered by CRM Code) and APP fraud (which requires dishonest deception). Even if Lloyds should have intervened on out-of-character transactions, intervention would not have prevented the loss as S was a registered company with no public indicators of fraud.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website