Finally, after years of Brussels debate, the EU distance selling regime now extends to financial services. Was it worth the wait? Decide for yourself.
Topic: Financial Services New Law
New development: Directive Number 2002/65/EC concerning the distance marketing of consumer financial services
It was back in 1997 that the EU "Distance Selling" Directive was signed off by the EU Council of Ministers, and it is nigh-on 2 years since that directive was brought into force in the UK by way of the Consumer Protection (Distance Selling) Regulations 2000. That directive and the 2000 UK Regulations apply to any sale of a product which is conducted without face to face contact between buyer and seller. One category of products to which the directive did not apply, however, was financial services. That gap in the regulation of distance selling in Europe is now to be closed.
What will change:
Sellers of financial services and products will be required to provide consumers with a comprehensive package of information before any contract for the sale of financial services can be concluded. The required disclosure will include information about the performance of the service offered, but there is nothing here which significantly adds to current UK disclosure requirements in this sector.
There will be a new mandatory right for consumers to cancel a contract for the purchase of financial services within 14 days after concluding it which will be extended to 30 days in the case of life insurance and pension plans. But as ever, there are going to be exceptions. Member states are given the right to exclude from the right of withdrawal mortgages or any other type of credit intended primarily for the purposes of acquiring property. Also excluded are insurance policies lasting less than a month and financial services whose price depends on fluctuations in the financial markets outside the supplier's control, for example sales of securities or foreign exchange.
Member states must also ensure that appropriate measures exist to allow consumers to request cancellation of a payment where fraudulent use has been made of their credit card in connection with any distance contract for financial services.
As regards commercial e-mails and telemarketing promoting financial services, member states are allowed either an opt-in or opt-out regime. In the case of telephone sales, specific requirements apply such as the need for the supplier to make explicitly clear at the beginning of the conversation the identity of the supplier and the commercial purpose of the call.
None of the rights conferred on the consumer by the Directive can be waived and the Directive's effect cannot be excluded by a governing law clause nominating the law of a non EU state.
Separately, there has been much debate on the introduction of so called "country of origin". "County of origin" means that so long as a marketer puts together marketing material which is in compliance with the laws of his home state, he does not have to worry whether the material also complies with he laws of other EU Member State where the material might be seen or read by potential customers.
As has happened in the case of the E-Commerce Regulations, however, country of origin is introduced as a principle by way of the new Directive but there are a number of significant exceptions.
For example, take a situation where financial services provider A based in Italy promotes its products to UK consumer B via A's website or emails sent by or on behalf of A. Assuming that Italy delays in implementing the new directive, and the UK does not, the UK can continue to impose UK regulations on A's marketing material, insofar as that material is received or viewed by B.
Timetable: The Directive was signed off on 23 September 2002 and has an implementation date of 9 October 2004.
What happens next:
Publication by the UK government of draft regulations implementing the Directive, maybe by summer 2003?