Upheld: Authorised Push Payment (APP) Scam - Investment Fraud - Failure to Reimburse complaint against Nationwide Building Society

Decision detail

Summary

Mr B and Mr W invested £100,800 with company G, which presented itself as a building company with a contract to install air conditioning units for a major hotel chain. They received interest payments for approximately one year before G went into administration. Nationwide declined their fraud claim, stating it was a civil dispute. The ombudsman found that G operated a scam by raising far more from investors than its contract required, misleading investors about future work, falsely claiming insurance protection, and misusing funds for personal expenses and sponsorship. Although G had a genuine hotel chain contract, the evidence showed systematic deception about how investor funds would be used. Nationwide, as a CRM Code signatory, was required to reimburse the customers as victims of an APP scam, and no exceptions to reimbursement applied.

The Ombudsman's reasoning

The ombudsman found that Mr B and Mr W were victims of an APP scam as defined in the CRM Code. Although G had a genuine contract with the hotel chain, the evidence showed G raised far more from investors than needed, misled investors about future work, falsely claimed insurance protection, and misused investor funds for personal and non-business purposes. The discrepancy between the stated purpose (funding hotel chain work) and actual use of funds (personal spending, sponsorship, etc.) resulted from dishonest deception. The fact that Mr B and Mr W received some returns is consistent with scam tactics to build trust. Nationwide failed to establish any of the limited exceptions to reimbursement under the CRM Code, as Mr B and Mr W had a reasonable basis for believing the investment was legitimate based on the information provided.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website