Upheld: Authorised Push Payment (APP) scam - investment fraud complaint against Nationwide Building Society

Decision detail

Summary

Mr H invested £14,900 with Company S in February 2024 under a Rent-to-Rent Agreement promising monthly returns of £635 for 36 months. After receiving nine payments, Company S's directors were arrested in January 2025 and the company entered liquidation in July 2025, leaving Mr H with an outstanding loss of £9,185. Mr H claimed this was an APP scam, but Nationwide initially refused to reimburse pending the outcome of police and Official Receiver investigations. The ombudsman found that Company S was operating a fraudulent scheme, evidenced by selling investments without underlying property agreements, passing two-thirds of funds to another likely scam without disclosure, and paying returns that exceeded legitimate income by 50%, suggesting a Ponzi structure. The ombudsman determined Mr H had a reasonable basis for believing Company S was legitimate and that Nationwide's warning did not meet the CRM Code definition of an 'Effective Warning', so no exceptions to reimbursement applied. Nationwide was directed to reimburse £9,185 plus 8% simple interest from 28 January 2026.

The Ombudsman's reasoning

The ombudsman applied the balance of probabilities test to determine whether Company S was operating a fraudulent scheme. While Company S engaged in some legitimate activity and paid returns to investors (which are features of sophisticated investment scams), the collective evidence demonstrated fraudulent intent: Company S sold investments without underlying agreements with landlords or social housing providers, sold investments in unbuilt properties, passed two-thirds of funds to another likely scam (Company C) without disclosure, and paid returns that exceeded legitimate income by 50%, suggesting a Ponzi scheme structure. The ombudsman rejected Nationwide's arguments that the evidence was merely circumstantial, finding that when considered collectively, the evidence clearly demonstrated Company S intended to scam investors. The ombudsman also found that Mr H had a reasonable basis for believing Company S was legitimate given the professional appearance of materials, positive reviews, Companies House registration, and solicitor review. The warning provided by Nationwide did not constitute an 'Effective Warning' under the CRM Code as it did not describe common features of investment scams and the steps it suggested would not have prevented the scam.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website