Not upheld: investment scam - refund claim and service complaint complaint against HSBC UK Bank Plc

Decision detail

Summary

Ms W invested £31,120 in art prints through Company S between October 2020 and August 2022, making six payments totalling £11,580.16 from her HSBC credit card to Company M (a payment processor). In June 2023, she learned Company S had ceased trading, and in August 2023 a newspaper article exposed it as fraudulent. Ms W sought refunds through Section 75 of the Consumer Credit Act and chargeback, but HSBC rejected the Section 75 claim because payments went to Company M rather than Company S, breaking the required debtor-creditor-supplier chain, and the chargeback deadline had passed. The ombudsman found HSBC made no errors in these decisions and that the payments did not present obvious fraud indicators that would have required intervention. HSBC's £100 compensation for administrative delays in responding to complaints was upheld as reasonable.

The Ombudsman's reasoning

The ombudsman found that while fraud occurred, HSBC was not liable under Section 75 because the debtor-creditor-supplier chain was broken (payments went to Company M, not Company S). Chargeback rules are set by card schemes and the 120-day deadline had passed. Under Payment Services Regulations 2017, while banks must monitor for fraud, HSBC should not have been expected to intervene on these payments as they were within credit limits, not unusually high for a major bank, spread over time without a scam pattern, and went to an established payment processor. The fraud only became apparent slowly, making intervention unlikely to have prevented the loss. HSBC's £100 compensation for administrative delays was reasonable given the circumstances.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website