Not upheld: Fraud reimbursement (APP scams) complaint against THE CO-OPERATIVE BANK P.L.C.

Decision detail

Summary

Mr and Ms M invested £38,000 in a holiday lodge investment with company L in February 2023, expecting quarterly rental income and a buyback with 10% uplift. They received returns until July 2024 when L entered administration and other investors raised concerns about legitimacy. They claimed reimbursement from Co-op as scam victims under the CRM Code, but Co-op declined. The ombudsman found insufficient evidence that L intended fraud from the outset or that the payments did not meet the legitimate business purpose intended by both parties. While acknowledging L's failure and ongoing police and administrator investigations, the ombudsman could not safely conclude fraud had occurred based on available evidence and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the CRM Code definition of an APP scam, which requires evidence that the customer transferred funds for what they believed were legitimate purposes but which were in fact fraudulent. While L failed to deliver expected returns and went into administration, the evidence does not sufficiently demonstrate that L intended fraud from the outset or that funds were not used for the stated business purposes. The existence of owned sites, planning permissions, and operational lodges suggests genuine business intention. Misrepresentations alone do not establish fraud. The ongoing investigations by administrators and police have not yet reached definitive conclusions. The ombudsman could not safely determine whether poor business practice or deliberate fraud caused the failure based on available evidence.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website