Upheld: Fraud reimbursement (APP scams) complaint against Starling Bank Limited

Decision detail

Summary

Mr L invested £21,500 with his Starling account in October 2024 in what he believed was a legitimate social housing investment opportunity with firm C, following earlier investments made through other banks. When C announced banking issues and failed to provide promised returns, and a police investigation was launched, Mr L claimed the investment was a scam. Starling initially refused to provide a reimbursement decision, citing complexity. The ombudsman upheld Mr L's complaint, finding that C was operating a sophisticated Ponzi scheme that had defrauded approximately 100 investors, with evidence including forged documents, false local authority contracts, and the same units sold to multiple investors. Starling was ordered to reimburse Mr L £21,400 (less the £100 excess) plus 8% interest, as the firm should have recognized the scam and processed the claim under the Faster Payments Scheme Reimbursement Rules without waiting for police investigation results.

The Ombudsman's reasoning

The ombudsman concluded that C fraudulently deceived Mr L into making the payment, meeting the definition of an APP scam under the Reimbursement Rules. The evidence demonstrated that C was operating a Ponzi scheme, receiving £20.2 million from investors but only spending £6 million on property development, with no legitimate income from the claimed local authority contracts. The ombudsman rejected Starling's argument that Mr L failed to meet the Consumer Standard of Caution, finding that the warning provided was light-touch and easy to bypass, and that Mr L had legitimate reasons to believe C was legitimate given his prior investments and knowledge of others who had invested. The ombudsman determined that Starling should have reached the scam conclusion promptly without waiting for police investigation results.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website