A Financial Ombudsman Service investigation found that Lloyds Bank should have intervened to prevent a debit card investment scam
Mr B, a Lloyds Bank customer, had been researching investment options when he was contacted by a representative from Options XO, a binary options trading company, with an opportunity for him to invest a small amount. Over four months, the representative continued communicating with Mr B and convinced him to make six payments from his debit card into the trading account, totalling £5,027.
The scam was uncovered when Mr B’s trading account balance fell to zero, and Options XO tried to persuade him to make more payments. He complained to Lloyds Bank that it should have stepped in and intervened after the first payment. The bank refused to reimburse him. Mr B took his complaint to the Financial Ombudsman Service for an independent investigation.
As part of the investigation, the FOS investigator had to establish whether Mr B or Lloyds Bank should be responsible for the loss of funds. As per legislation, since Mr B authorised the transactions at the time – believing the investment opportunity to be legitimate – he should be responsible; however, banks and payment service providers (PSPs), such as Lloyds, have a duty to protect customers from financial loss due to fraud and scams and if they have failed in this duty, they could be found responsible.
In this case, the FOS investigator found that there had been warnings published about Options XO on the Investor Alerts Panel of the International Organisation of Securities Commissions (IOSCO), as well as other regulatory warning lists, in the months before Mr B’s scam. As a result, and as experts in banking security, Lloyds should reasonably have been aware of the warnings about the firm, and Mr B’s payments to Options XO should have raised red flags and prompted the bank to intervene.
The FOS investigator concluded that if Mr B had been contacted by his bank to discuss the payments, the scam would have been uncovered, and the money would not have been lost. Lloyds Bank was instructed to reimburse Mr B the total lost (£5,027) plus 8% interest.
Scams where the victim is persuaded to make payments to an account by the fraudster for reasons they believe to be legitimate – such as an investment – are known as Authorised Push Payment (APP) fraud.
APP fraud typically uses social engineering techniques such as impersonation or manipulation to gain the victim’s trust and encourage them to transfer sometimes substantial amounts of money. Typical forms of APP fraud include:
If you, a family member, a friend, or your business has been targeted by an APP scam, it is essential to advise the police and your bank urgently. You can also report any suspected scamming activity to Action Fraud, the National Fraud and Cyber Crime Reporting Centre.
If your bank refuses to reimburse or claims you are liable for the loss, you can take your complaint to the Financial Ombudsman Service (FOS) for an independent investigation.
Commenting on the FOS investigation, Sarah Spruce, head of the Authorised Push Payment Fraud Claims team at TLW Solicitors, says:
“This is another case that shows FOS taking banks to account for not sufficiently updating their systems about warnings relating to dodgy firms. Had the bank heeded those warnings properly, Mr. B would never have lost his money in the first place, but it is great to see that the funds have finally been reimbursed.
The specialist and experienced APP Fraud team at TLW Solicitors deal with a wide range of claims where people have fallen victim to the scammers. Often they feel ashamed and embarrassed about what has happened. I want to assure them that they are not alone and there is help available.”
We have many years of experience taking APP scam cases against banks to the Financial Ombudsman Service. We know the processes involved in making a claim and seeking compensation and the strict time limits that can apply.
If you, a friend or a loved one has been tricked into making payments to fraudsters via online banking or using your debit card, please get in touch for a no-obligation initial discussion.
We work on a ‘no win, no fee’ basis. Our experienced team can help you through the compensation and appeals processes, even if your case has been rejected before.
Call us on 0800 169 5925, email firstname.lastname@example.org or complete one of the forms below.
It’s important to get advice as soon as possible, as strict time limits can apply.
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