Metro Bank PLC · DRN-6148245

The complaint Mr S complains that Metro Bank PLC (’Metro’) won’t reimburse the funds he lost when he fell victim to a scam. What happened Mr S says that he and his business partners sold their business. The CEO of the company that bought the business introduced Mr S and his former partners to an investment opportunity he was already involved in with a company I’ll call ‘G’. G was a building company that offered short-term loans. Mr S understood G had a contract to install air conditioning units for a major hotel chain and that his investment would be used to fund this work. In return, he would receive interest payments. In March 2024 Mr S invested £188,000 in G. He initially received returns, but these stopped and G went into administration, Mr S raised a fraud claim with Metro. Metro didn’t agree to reimburse Mr S’s loss. It said that Mr S’s investment had failed and he should contact the administrators of G. Mr S was unhappy with Metro’s response and brought a complaint to this service through a professional representative. The investigator who considered this complaint recommended that Metro reimburse Mr S’s full outstanding loss. She said she thought Mr S was the victim of a scam and that Metro couldn’t fairly rely on an exclusion to reimbursement set out in the Lending Standards Board’s Contingent Reimbursement Model Code (‘CRM Code’). Metro didn’t agree with the investigator’s findings, so Mr S’s complaint has been passed to me to decide. In summary, Metro said: - G was a legitimate company that did have a contract to carry out work with a hotel chain. The fact the company failed doesn’t mean it operated a scam. - There is no way of establishing whether Mr S’s funds were used to carry out genuine work. - Mr S received returns until G stopped trading. - As G was a legitimate company it’s hard to see how Metro could have prevented the loss. - Metro gave Mr S a warning when he made the payment which included that if it turned out to be a scam Metro wouldn’t reimburse him. 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 broad terms, the starting position at law is that a firm is expected to process payments and withdrawals that a customer authorises, in accordance with the Payment Services Regulations and the terms and conditions of the customer’s account. However, where the customer made the payment as a consequence of the actions of a fraudster, it may

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sometimes be fair and reasonable for the firm to reimburse the customer even though they authorised the payment. At the time of these payments, Metro was a signatory of the CRM Code. This code required firms to reimburse customers who had been the victim of certain types of scams, in all but a limited number of circumstances. But customers were only covered by the code where they had been the victim of a scam – as defined in the code. Has Mr S been the victim of a scam, as defined in the CRM Code? As I said above, under the CRM Code, the starting principle is that a firm should reimburse a customer who is the victim of an authorised push payment (APP) scam, except in limited circumstances. But the CRM Code only applies if the definition of APP scam, as set out in it, is met. I have considered whether Mr S’s claim falls within the scope of the CRM Code, which defines an APP scam as: ...a transfer of funds executed across Faster Payments…where: (i) The Customer intended to transfer funds to another person, but was instead deceived into transferring the funds to a different person; or (ii) The Customer transferred funds to another person for what they believed were legitimate purposes but which were in fact fraudulent. To decide whether Mr S is the victim of an APP scam as defined in the CRM Code I have considered: - The purpose of the payment and whether Mr S thought this purpose was legitimate. - The purpose the recipient (G) had in mind at the time of the payment, and whether this broadly aligned with what Mr S understood to have been the purpose of the payment. - Whether there was a significant difference in these purposes, and if so, whether it could be said this was as a result of dishonest deception. I’m satisfied Mr S made the payment with the intention of investing with G. He thought his funds would be used to fund work G had been contracted to do by a major hotel chain, and that he would receive interest payments in return. I haven’t seen anything to suggest that Mr S didn’t think this was legitimate. But I think the evidence I’ve seen suggests G didn’t intend to act in line with the purpose for the payment it had agreed with Mr S. I note G did have a genuine contract to carry out work for the major hotel chain it mentioned to investors. But the administrators for the company have confirmed the value of the contract to G between 2021 and 2024 was £4.4 million, but that when it went into administration G owed £25.3 million to investors. So, G had raised far more from investors than the available evidence suggested it needed to fulfil the contract. It also appears that G had been deceiving investors about future work it would receive from the hotel chain. Multiple investors were told the hotel chain planned to refurbish numerous hotels around the country and that this would lead to around £18 million in revenue for G. But there’s no evidence of this kind of income on G’s account statements and, as the administrators have said, the actual amount G received from the hotel chain was significantly lower than this.

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The administrators have said they can’t confirm exactly how much of investors’ money was used to carry out work for the hotel chain, or in the ordinary course of business, but it is significantly lower than the amount raised from investors. Administrators also said one director loaned himself around £560,000, which has not been paid back. And that company funds have been spent on seemingly non-company related expenses, including: • around $6 million spent on sponsoring an American-based motor racing team between October 2020 and May 2024 • around £500,000 spent by one director on home improvements, which was not paid back to the company • around £4 million sent to Spanish bank accounts, which the directors of the company say was to raise investment but are now claiming has been lost due to fraud • around £2 million sent abroad for supposed investment purposes, which the directors of the company have told administrators has now been lost due to fraud committed against the company This service has also reviewed information relating to accounts held by G. While I can’t share details of this information, it appears to show there was a large amount of spending from the accounts that wasn’t related to the company’s contract with the hotel chain or other business purposes. Funds appear to have been used for sponsorship or personal reasons – in line with what the administrators have said (above). G also told investors it had a credit insurance policy with a large insurance provider, which would provide protection for investors if something went wrong. But the insurance provider has told police that there was no policy in place with the company, and that the policy number G gave investors didn’t match its policy number format. I think the available evidence shows G wasn’t providing the investment it had led Mr S to believe he was making. This means the purpose G intended for the payments Mr S made wasn’t aligned with the purpose Mr S intended for the payments. The directors will have known they intended to use the majority of investors’ funds for a different purpose, that they were misleading investors about the amount of future work the company would receive from the hotel chain, and about the insurance policy. So I also think the discrepancy in the payment purposes was the result of dishonest deception on the part of the company. I appreciate that some investor money will have been used to carry out work for the hotel chain, and that we don’t know which specific payments G received were made towards that work. But, overall, I’m satisfied that this wasn’t a legitimate investment and Mr S’s and other investors’ funds weren’t being used in the manner they were led to believe they were. So, regardless of where Mr S’s specific payment went, G and its model was illegitimate, and Mr S was deceived on this point. It’s clear Mr S received some interest payments back from G. But a victim initially receiving returns is a common feature of a number of scams, so I don’t think this means that G was using Mr S’s money as intended or wasn’t operating a scam. It seems likely the company provided returns to gain trust and further investment.

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I’ve considered also that there may be evidence our service does not have access to or that may become available later. But, for the reasons I’ve explained above, I’m satisfied there is sufficient evidence available for me to come to a fair and reasonable decision on this complaint, and I don’t consider it likely that the outcome of any ongoing investigation would significantly affect the conclusions I have reached. Is Mr S entitled to a refund under the CRM Code? As I explained above, Metro was a signatory of the CRM Code. This code required firms to reimburse customers who had been the victim of authorised push payment scams, like this one, in all but a limited number of circumstances. It is for Metro to establish that one of those exceptions to reimbursement applies. Under the CRM Code, a firm may choose not to reimburse a customer if it can establish that: • The customer ignored an effective warning in relation to the payment being made • The customer made the payment without a reasonable basis for believing that: o the payee was the person the customer was expecting to pay; o the payment was for genuine goods or services; and/or o the person or business with whom they transacted was legitimate There are further exceptions in the CRM Code, but they don’t apply here. Metro hasn’t suggested that it is seeking to rely on an exception to reimbursement but for the sake of completeness I’ll briefly cover whether I think any exception can fairly be applied. Mr S was introduced to the investment by someone who had invested with G for some time and received the returns they expected. He had met the director of G who had explained how the investment worked and had met other investors. Mr S also completed a business credit check. I can see why these checks would have made Mr S think the investment was legitimate. I don’t think there was anything about what Mr S was told about the investment or the communication he received from G that ought to have caused him significant concern either. I haven’t seen any evidence that suggests there were warning signs that G wasn’t offering a genuine investment when Mr S made his payment. Overall, I don’t think Metro has established that Mr S made the payment without a reasonable basis for believing that the investment was legitimate. Metro spoke to Mr S when he made the payment request. Although Mr S told Metro’s fraud team that he was making an investment, he wasn’t given any investment related warnings or asked any further questions. Mr S was told not to make the payment if he had been told he needed to pay an advance fee or if an organisation had threatened him. The Metro adviser then said Mr S could lose his money if the payment resulted in a scam. This warning certainly wasn’t effective, as it wasn’t specific, so Mr S can’t have ignored it. As I don’t think Metro has established that any of the exceptions to reimbursement under the CRM Code apply here, it should refund the money Mr S lost. Redress As Mr S received interest payments from G these payments need to be deducted from the amount Metro must refund him. Mr S invested £188,000 and received back £32,599.20 (five times £5,433.20 plus two payments which equal £5,433.20) in respect of this investment. The investigator’s table included an additional credit based on information Mr S’s representative had provided. Now that this service has seen the statements for the account

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that received the credits, I can confirm the credits were as set out above. So Mr S’s outstanding loss is £155,400.80. Whilst I’d expect Metro to be on the look-out for out of character transactions, I don’t think that any intervention would have caused it to be concerned given what was known about G at the time. But I do think there was sufficient evidence available at the time Mr S reported his scam claim for Metro to assess the claim and conclude that he had been the victim of an APP scam as set out in the CRM Code. So, I think Metro should have refunded Mr S’s losses in its original response to his claim, and so should now pay 8% interest on this refund from the date it originally declined his claim to the date of settlement. My final decision For the reasons set out above, I uphold this complaint and require Metro Bank PLC to: • Refund Mr S £155,400.80; and • Pay 8% simple interest on that refund, from the date it originally declined Mr S’s claim to the date of settlement. If Metro Bank PLC is legally required to deduct tax from the interest it should send Mr S a tax deduction certificate so he can claim it back from HMRC if appropriate Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 26 May 2026. Jay Hadfield Ombudsman

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