Upheld: mishandling of fraud investigation and failure to remove fraudulent accounts from credit record complaint against Telefonica UK Limited (trading as O2)
Financial Ombudsman decision DRN-6192598 of 2026-04-13T00:00:00+00:00. mishandling of fraud investigation and failure to remove fraudulent accounts from credit record complaint against Telefonica UK Limited (trading as O2). Outcome: Upheld.
Decision detail
| Reference | DRN-6192598 |
|---|---|
| Decision date | 2026-04-13T00:00:00+00:00 |
| Firm | Telefonica UK Limited (trading as O2) |
| Product | fixed sum loan agreement / credit agreement |
| Claim type | mishandling of fraud investigation and failure to remove fraudulent accounts from credit record |
| Outcome | Upheld |
| Remedy | O2 directed to: (1) Refund £1,503.92 paid for car hire from 13 October to 23 December 2025, less the £262.80 processing fee and the pro-rated amount Mr C would have paid had the new leasing agreement started on 13 October 2025, plus 8% simple interest per annum from 24 December 2025 to settlement date; (2) Pay £400 distress and inconvenience compensation; (3) Ensure all adverse loadings are removed from Mr C's credit record. |
Summary
Mr C was a victim of identity fraud when fraudulent applications for two credit agreements were submitted in his name in March 2025. Although O2 identified the fraud and agreed to remove all records, they only removed one of the two accounts, leaving the second showing five months of missed payments. This adverse credit reporting caused Mr C to be declined a car lease in October 2025, forcing him to incur £1,503.92 in car hire costs over 2.5 months. The ombudsman found the adverse loadings were the direct cause of the declinations, evidenced by an identical application being approved the day after removal. O2 was directed to refund the car hire costs (less the processing fee and pro-rated lease amount), pay £400 for distress and inconvenience, and ensure all adverse loadings are permanently removed from Mr C's credit record.
The Ombudsman's reasoning
The ombudsman found that while O2's initial fraud investigation was reasonable and their proposed resolution was fair, they failed in execution by only removing one of two fraudulent accounts. The continued reporting of missed payments on the remaining account directly caused Mr C's credit declinations, as evidenced by the immediate approval of an identical application the day after adverse loadings were removed. Although multiple factors influence lending decisions, the evidence strongly supports that the adverse loadings were the sole cause of the declinations. Mr C took reasonable mitigation steps and was entitled to compensation for the higher car hire costs incurred during the period he could not obtain a lease, the processing fee for the replacement lease, and distress and inconvenience compensation. The ombudsman declined to award compensation for the excess waiver policy as it was disproportionately expensive and not a necessary consequence of O2's error.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Telefonica UK Limited (trading as O2), all decisions | 10 | 55% |
Source
Read the original decision on the Financial Ombudsman Service website