Distance selling of financial services – EU agreement

Health and Consumer Protection Commissioner David Byrne said:

"This Directive provides for enhanced consumer protection in the important and often complex area of marketing financial products. It complements and underpins the E-commerce Directive, making it easier for businesses to operate under legal certainty and for consumers to make transactions with confidence. Winning consumer confidence is the key to opening up the financial services market across national borders to the benefit of European consumers through increased competition and choice."

The Directive fills a gap in existing consumer protection legislation, left by the exclusion of financial services from the 1997 Directive on distance selling. Its main features are:

• the prohibition of abusive marketing practices seeking to oblige consumers to buy a service they have not solicited (known as "inertia selling");
• rules to restrict other practices such as unsolicited phone calls and e-mails (i.e. cold-calling and spamming);
• an obligation to provide consumers with comprehensive information before a contract is concluded; and
• a consumer right to withdraw from the contract during a cool-off period - except in cases where there is a risk of price fluctuations in the financial market.

The agreed text sets out two options for rules Member States are to apply with respect to the use of cold-calling and spamming.

Under the first option ("opt-in"), cold calling and spamming are prohibited unless the consumer has expressly consented; under the second option ("opt-out"), this is prohibited only if the consumer has signalled his/her objection, e.g. by entering his/her name on a register set up for this purpose.

Sellers of financial services and products will also be obliged to provide consumers with comprehensive information before a contract is concluded.

This information should include the identity, contact details etc. of the supplier, the price and payment arrangements, contractual rights and obligations as well as information about the performance of the service offered. Information on the technical quality and nature of the financial service must be also provided in accordance with the rules of the "vertical" directives on credit, insurance and investment services or with relevant national rules for services not currently subject to EU legislation.

Consumers will also have the right to cancel a contract within 14 days after signing up, extended in the case of life insurance and pension plans to 30 days. This right will not, however, apply to financial services that may be subject to fluctuations in the financial market, such as sales of foreign currency and securities.

Member States may also exclude mortgage or property credit from this right of withdrawal from a contract. In addition, in the event of fraudulent use of payment cards or other non-cash means of payment consumers will be able to cancel transactions and be entitled to reimbursement of any sums charged.

The Directive will now go back to Council for final adoption.

The Recommendation approved by Parliament yesterday