Bank of Scotland plc · DRN-6197037

The complaint Mr and Mrs A complain that Bank of Scotland plc, trading as Halifax, won’t reimburse them money they have lost to fraud. What happened As the circumstances of this complaint are well-known to both parties, I have summarised them briefly below. In or around early 2024, Mr and Mrs A sought the services of a contractor to carry out significant home improvements on their property. They were recommended the services of a builder from a friend, who they engaged and agreed to complete the project. Between 28 February and 1 November 2024, Mr and Mrs A made 12 payments from their Halifax account to that contractor, in payment for the project to be completed. However, progress on the site eventually stalled and the contractor issued an arbitration notice after it claimed the project had become financially unviable. As some of the works paid for had not been completed, and there were concerns over some of the work that had already been completed, Mr and Mrs A reported the matter to Halifax as they felt they had been defrauded by the contractor. Halifax considered Mr and Mrs A’s claim but concluded that it wasn’t liable for the loss they had suffered. It found that the matter was more likely a civil dispute between Mr and Mrs A and the contractor, rather than a case of intent to defraud. Mr and Mrs A disagreed, so they referred their complaint to our service for an independent review. An Investigator considered the evidence provided but agreed with Halifax’s position that this was more likely than not a civil dispute between both parties. They therefore concluded that Halifax were fair in declining to reimburse them. Mr and Mrs A disagreed with that assessment, so the matter has now been passed to me to decide. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. In deciding what’s fair and reasonable in all the circumstances of a complaint, I’m required to take into account relevant: law and regulations; regulators’ rules, guidance and standards; codes of practice; and, where appropriate, what I consider to have been good industry practice at the time. There is no dispute here that the transactions in question were authorised. And the starting position in law is that Mr and Mrs A will be held liable for the transactions they authorised in the first instance. That is due to Halifax’s primary obligation to process payments in line with its customer’s instructions, as set out in the Payment Services Regulations 2017.

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However, Halifax was a signatory to the Lending Standards Board’s Contingent Reimbursement Model (the CRM Code) at the time the payments between 28 February to 4 October 2024 were made. Under that Code, firms are expected to reimburse customers who fall victim to fraud, subject to a number of conditions and exceptions. However, the CRM Code is only relevant if I’m persuaded Mr and Mrs A were a victim of fraud. The Code specifically doesn’t cover certain types of disputes. It says: “This Code does not apply to…private civil disputes, such as where a Customer has paid a legitimate supplier for goods, services, or digital content but has not received them, they are defective in some way, or the Customer is otherwise dissatisfied with the supplier”. Additionally, the final payment Mr and Mrs A made was carried out on 1 November 2024, when the CRM Code was no longer in force. However, from 7 October 2024, Payment Services Providers in the UK, like Halifax, have been bound by the Faster Payments Scheme (FPS) and the CHAPS reimbursement rules (“Reimbursement Rules”). Under these rules, most victims of Authorised Push Payment (APP) scams should be reimbursed – but “private civil disputes” are also not covered. The Reimbursement Rules define an APP Scam as: “Where a person uses a fraudulent or dishonest act or course of conduct to manipulate, deceive or persuade a consumer into transferring funds from the consumer’s relevant account to a relevant account not controlled by the consumer, where: • The recipient is not who the consumer intended to pay, or • The payment is not for the purpose the consumer intended” By contrast, a private civil dispute is defined as; “A dispute between a consumer and payee which is a private matter between them for resolution in the civil courts, rather than involving criminal fraud or dishonesty”. In its published policy statement PS23/3, the Payment Systems Regulator gave further guidance: “2.6 Civil disputes do not meet our definition of an APP fraud as the customer has not been deceived […] The law protects consumer rights when purchasing goods and services, including through the Consumer Rights Act.” 2.5 provides an example of when this might apply: “…such as where a customer has paid a legitimate supplier for goods or services but has not received them, they are defective in some way, or the customer is otherwise dissatisfied with the supplier.” Mr and Mrs A argue that this matter is a case of fraud rather than a civil dispute between them and the contractor, but Halifax has argued to the contrary. I therefore firstly need to set out my findings on whether I believe what has happened to Mr and Mrs A meets the broadly similar definitions of fraud within the CRM Code and Reimbursement Rules. Having considered all the documents Mr and Mrs A have submitted, I have seen no persuasive evidence that the contractor was an illegitimate one. They appear to have come recommended by a friend and there is no suggestion they were misrepresenting their identity.

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To the contrary, Mr and Mrs A paid an account in the contractor’s name. And, while I cannot go into specific details regarding that account due to data protection laws, the account paid appears to reflect the typical usage of a contractor working in the building trade. The account provider has also deemed the fraud report made a buyer/seller dispute and has told our service that no other concerns had been raised regarding the account holder: something that would typically be a feature in cases of rogue trader frauds. I have also noted that, while some of the work paid for was not carried out, a large proportion of it was. Mr and Mrs A have also told our service that the work that was carried out was substandard and required replacing. But that isn’t reflected in a report they commissioned from a surveyor, where they had asked for an inspection of the extension that had been built as they had concerns regarding some cracks they had seen. The report provided seems to suggest that there were no concerns regarding the structure that had been built. I understand that Mr and Mrs A were concerned with a lack of progress toward the end of the project, and it would appear a dispute arose from those delays. I can see the contractor communicated with Mr and Mrs A about these delays and eventually invoked a clause within their contract calling for independent arbitration, as the contractor found the project had started to go “well beyond the scope of the original contract”. I am unable to comment on whether this was a reasonable course of action to take, but it does appear to be a plausible defence for not completing the remaining work. Mr and Mrs A have told our service that further funds were demanded when the dispute arose, and it is entirely possible that the contractor retained their funds as they believed they were legitimately owed this money for existing work. That is a dispute to be resolved between the parties involved and not a matter for me to decide. But from the evidence available, I cannot presently rule out other, legitimate reasons for the contractor ceasing the project and retaining the payments made. I have read Mr and Mrs A’s detailed submissions in response to our Investigator’s view. And while I appreciate the depth of these, I do not intend to reply with the same level of detail. That isn’t because I have ignored what they have submitted, I simply do not feel it is necessary to comment on every point that has been made. Our rules allow me to do this, and it simply reflects the informal nature of our service. But I would like to assure Mr and Mrs A that I have considered these submissions when reaching the findings I have set out above. I do understand the frustrations that can be caused in high-value projects that have gone wrong. And I do understand that there could be negligence and unprofessionalism that has been demonstrated by the contracted party that has led to a financial loss. But ultimately this would not be a matter to hold Halifax liable for. It is only required to reimburse customers that have fallen victim to an APP scam, as defined within the frameworks I have set out above. And as this matter cannot reasonably be defined as an APP scam, Halifax acted fairly in declining to reimburse any loss suffered. My final decision For the reasons I have given above, I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr A and Mrs A to accept or reject my decision before 21 April 2026. Stephen Westlake Ombudsman

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