The Directive sets common standards for the information that must be supplied to consumers of financial services prior to a contract being concluded at a distance.
A Directive regulating the distance selling of all other goods and services was adopted in 1997 and entered into force in 2000. Financial services were excluded from its scope.
The Distance Marketing of Financial Services Directive aims to encourage competition between suppliers throughout the EU. Many financial services, such as banking, credit, insurance, personal pension, investment or payment services, lend themselves to being sold over the internet, with consequent cost and access benefits for consumers and business alike.
The Directive deals mainly with aspects relating to pre-contract disclosure. According to the consultation document the following must be disclosed to the consumer:
the supplier, including details of any professional the consumer deals with instead of the supplier;
the financial service, including a description of the main characteristics of the financial service and the total price to be paid by the consumer;
the distance contract, including information on the right of withdrawal (if applicable), any rights the parties have to terminate the contract early, any contractual clause relating to the law applicable to the contract; and
redress: any out-of-court complaints and redress arrangements and any compensation arrangements other than those covered by the Deposit Guarantee and Investor Compensation Directives.
The Directive also focuses on the right of the consumer to withdraw from the contract. In general this right lasts 30 days for life insurance and personal pensions and 14 days for other contracts. There are certain exemptions to this, most notably those investments, such as unit trusts, which are subject to movements in the stock market.
The closing date for the consultation is 17th October 2003. The Directive is to be implemented by 9th October 2004.
The consultation document can be downloaded as a 69-page PDF.
