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Watchdog will get legal teeth

The Financial Ombudsman is to receive more teeth at N2 as the rulings it makes against firms will be directly enforceable in the High Court for the first time.

From December 1, when the single ombudsman replaces the eight existing bodies, investors will be able to use the courts to force a firm to pay an award if it is unwilling to do so.

This does not involve rehearing the merits of the case, as happens now, but simply asking the court to enforce the ombudsman&#39s decision.

The FSA says this change is significant where either a firm is unable to pay because doing so would put it into default or if it contests the decision and is reluctant to pay up.

Currently, consumers have to go through the regulator if a firm refuses to pay or is unable to pay an award.

The PIA cannot force firms to pay but can use regulatory pressure with the ultimate threat of revoking the licence of the firm.

Unlike complainants, IFAs have no avenue to appeal against decisions made against them by the ombudsman once it has reached the final stage. They can go to court but only to question the method by which the award is reached, not the amount itself.

Financial Ombudsman head of communications David Cresswell says: “In a sense, this is saying coming to the ombudsman as far as a consumer is concerned is like going to court.”

IFA Wentworth Rose managing director Philip Rose says: “It gives the ombudsman more teeth, if we are going to have an ombudsman we might as well have one that works.”

Aifa director general Paul Smee says: “In practice it will not make much difference because not many firms will ignore a decision made by the ombudsman.”

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