New distance marketing financial services rules coming into force 31 October 2004 require certain disclosures to be given ‘in good time’ before the conclusion of the contract with the consumer and in a ‘durable medium’. The FSA has recently offered guidance on how these phrases should be interpreted:
Topic: Financial Services
Who: The Financial Services Authority
When: September 2004
The Financial Services Authority ("FSA") has offered some more guidance on the interpretation of the phrases "in good time" and "in a durable medium" that crop up in the UK rules implementing the EU directive on the distance marketing of financial services to consumers.
"In good time"
The "in good time" requirement is in the context of the obligation on the part of those selling financial services at a distance to provide certain information "in good time" prior to the consumer being bound by any distance contract.
There are two broad categories of disclosure that are required here.
First of all there is the disclosure of certain prescribed information such as a description of the main characteristics of the financial service in question and its total price, in a clear and comprehensible manner appropriate to the means of communication being used. In the context of financial services which are not governed by the FSA Handbook, these are to be found at Schedule 1 to the Financial Services (Distance Marketing) Regulations 2004 ("the Regulations").
One "in good time" disclosure type must be "in a durable medium"
The other category of disclosure that has to be made "in good time" before the contract is concluded must be provided "on paper, or in another durable medium which is available and accessible to the consumer". The information here is essentially "all the contractual terms and conditions" of the insurance policy or other financial service on offer as well as the prescribed information which, for non-FSA Handbook governed financial service distance sellers, appears in Schedule 1 to the Regulations.
Just how long is "in good time"?
Just how far in advance of the conclusion of the contract, does "in good time" have to be? The FSA's answer is that it all depends on the type of product. If it is a short term and fairly simple product, (an example might be an insurance policy against credit card loss or against a broken windscreen), then a relatively short period, perhaps a handful of working days, ought to be sufficient to give the consumer a reasonable opportunity to consider the deal on offer in full.
If on the other hand the product is not straightforward and/or is longer term (examples here might be medical insurance or mortgages), then it is likely that "in good time" will be a longer period, perhaps 14-21 calendar days or maybe even longer depending on the circumstances.
"In a durable medium"
Here FSA guidance indicates that standard website content will not classify as "in a durable medium". This is for the simple reason that website content can be changed from one moment to another. Other on line content, however, will classify as being in a durable medium.
This will include an e-mail sent by the provider to the consumer or a pdf which is available on a website for downloading. Whether a pdf will in all circumstances comply with the other requirement here, which is that the medium is "available and accessible to the consumer" is a separate question and will depend on the circumstances and will require separate legal advice.
Why this matters:
It is helpful for the FSA to give further guidance on the proper interpretation of phrases which are critical to a proper understanding of and compliance with the new distance marketing regime for financial services. None of these pronouncements by the regulator are of course the last word on these matters.
One reason for this is that the FSA's own rules do not cover all distance sales of financial services. The other reason is that at the end of the day it is for the Courts to decide on these issues.
For all practical purposes, however, it is the FSA that marketers will have to answer to in the first instance if their activities are governed by the FSA Handbook as of 31 October 2004. Also, even if they are not Handbook-governed, distance marketers of general insurance who are governed by the Regulations until 14 January 2005 will also have to answer to the FSA in this context since it will be the regulator. So it is probably a wise move to weigh very heavily any guidance that they do offer on these matters.