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 similar Directive – on the distance selling of all other goods and services – came into force in 2000, but financial services were excluded from its scope.
The Distance Marketing of Consumer 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 will be implemented by the Financial Services (Distance Marketing) Regulations 2004, which were laid before Parliament in June. The Regulations deal mainly with pre-contract disclosure, and do not cover sole traders, partnerships or unincorporated associations.
In general, according to the Regulations, the following must be disclosed to the consumer in all distance sale consumer credit contracts:
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 provisions in relation to disclosure will come into force on 31st October 2004 with regard to non-regulated consumer credit agreements. For regulated consumer credit agreements the provisions will come into force on 31st May 2005.
The Regulations also focus 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 rules relating to cancellation will come into force on 31st October – a few weeks past the implementation deadline of 9th October set by the EU – for both regulated and non-regulated consumer credit contracts.
