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

Decision detail

Summary

C, a limited company, invested £51,250 in what it believed was a legitimate Rent-to-Rent social housing investment opportunity with business S, making two payments in June and October 2024 through law firms. C received some returns initially but in January 2025, S's directors were arrested and the company subsequently entered compulsory liquidation. C complained to Starling Bank that it had been the victim of an APP scam and sought reimbursement. Starling initially refused, characterizing the matter as a civil dispute. The ombudsman upheld the complaint, finding that S was operating a fraudulent scheme involving non-existent property agreements, unsuitable properties, and returns paid from investor funds rather than legitimate profits. Although C had a reasonable basis for believing the investment was genuine and the payments went through solicitors, the ombudsman determined that C was entitled to reimbursement under both the CRM Code and the Reimbursement Rules, with no valid exceptions applying.

The Ombudsman's reasoning

The ombudsman concluded that S was operating a fraudulent scheme rather than a legitimate investment opportunity, based on the collective weight of evidence including: S's lack of actual agreements with landlords and social housing providers despite claiming to have them; investment in non-existent or unsuitable properties; returns paid to investors exceeding legitimate income received (indicative of a Ponzi scheme); and diversion of investor funds to another suspected scam entity without disclosure. Although S engaged in some legitimate activity and paid some returns to investors (which made the scam more sophisticated and believable), the evidence demonstrated intentional deception. C had a reasonable basis for believing the investment was legitimate given the professional presentation, Companies House registration, involvement of genuine solicitors, and personal recommendations. The payments to solicitors rather than directly to S did not prevent the CRM Code or Reimbursement Rules from applying, as the solicitors were acting as agents for S. No valid exceptions to reimbursement under either the CRM Code or Reimbursement Rules were established by Starling.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website