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&#39Watchdog may be legally wrong over dual-pricing&#39

The Building Societies&#39 Association is advising its members that the Financial Ombudsman may be legally wrong in its recent decisions against dual-priced products.

In the last few months, the ombudsman has issued adjudications against Nationwide Building Society, Halifax and Cheltenham & Gloucester banks while Norwich & Peterborough Building Society and Abbey National are awaiting final decisions.

The BSA says it has taken legal advice and has circulated guidance to mutuals which includes two key arguments against the rulings which have had a major impact on lenders&#39 mortgage-pricing strategies.

First, claims the BSA, legal opinion is that the Financial Services and Markets Act places an obligation on the ombudsman to consult fully before reaching a decision.

Second, it says there is doubt about whether this lack of consultation and the absence of an appeal process is consistent with human rights legislation.

Nationwide, which is paying compensation of £90m to 400,000 borrowers, says there should be a second stage that the Financial Ombudsman should go through before making decisions.

Nationwide spokeswoman Jennifer Stoddart says: “We have played by the rules but we would welcome change. When the ombudsman is in a position to make decisions that have a major impact on lenders&#39 pricing policy, there should be a second stage involving perhaps the FSA or OFT.”

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