Finance Contracts

Scope

The European Communities (Distance Marketing of Consumer Financial Services) Regulations give effect to Directive 2002/65/EC concerning the distance marketing of consumer financial services. They apply to the marketing and supply of financial services to consumers under organised distance marketing schemes.

A consumer, in this context, is an individual who is acting outside his or her trade business or profession and financial service includes any financial product or service of a banking, credit, insurance, personal pension, investment or payment nature.

The Regulations deal with

  • the information which a consumer must be given before entering into a contract;
  • the consumer’s right to cancel a range (but not all types) of contracts once entered into;
  • obligations on providers of payment cards;
  • the prohibition of the provision of unsolicited financial services to consumers;
  • restrictions in relation to unsolicited communications;
  • sanctions and enforcement.

Mandatory Provisions

A distance contract for the supply of a financial service to a consumer is not enforceable against the consumer unless the requirements of the Regulation are complied with.

Any purported waiver by a consumer of a right conferred on consumers by the Regulations is void. A term contained in a distance contract for the supply of a financial service is void in so far as the term is inconsistent with The Regulations.

A right conferred on consumers by The Regulations cannot be excluded or diminished by choosing as the law applicable to a distance contract for the supply of a financial service the law of a country or territory that is not a Member State. This applies only if the contract is closely connected with a Member State.


Definitions

A distance contract for the supply of a financial service is a contract under which a supplier undertakes to supply a financial service to a consumer under an organised distance sales, or service-provision, scheme operated by the supplier, who, for the purposes of the contract, makes exclusive use of one or more means of distance communication up to and including the time when the contract is entered into.

A financial service is any service of a kind normally provided in the ordinary course of carrying on a banking business, an insurance business or a business of providing credit, personal pensions, an investment service or a payment service.

The regulations are broader in scope than might first appear. A means of distance communication” means any means that enables persons to communicate with each other when they are not in each other’s presence;


Pre-Contract Information I

Within a reasonable time before a consumer is bound by a distance contract for the supply of a financial service, the supplier must give the consumer the following information

  • the identity and the main business of the supplier, the geographical address at which the business of the supplier is established and any other geographical address that may be relevant to the consumer’s relationship with the supplier;
  • if the consumer resides in another Member State and the supplier has a representative in that State, the identity of that representative, and the geographical address relevant to the consumer’s relations with that representative;
  • if the consumer’s dealings are with a person (other than the supplier) who is acting as an advisor or agent, the person’s identity and the capacity in which the person is acting with respect to the consumer, and the person’s physical address so far as it is relevant to the consumer’s relations with that person, and if the person has an electronic mailing address, that address;
  • if the supplier is registered as a company or as a business in a public register particulars of the register in which the supplier is registered and the supplier’s registration number (if any), or if there is no such number, an equivalent means of identifying the supplier in that register;

Pre-Contract Information II

The following informaiion is also  required;

  • if the supplier’s business is subject to an authorisation scheme, the particulars of the relevant supervisory authority;
  • if the supplier is a member of a profession regulated by law, particulars specifying or identifying any professional body or similar institution of which the supplier is a member, and the professional designation of the supplier and the Member State where the designation has been conferred, and a reference to the applicable rules governing the profession in that Member State and to where those rules can be accessed;
  • if the supplier is registered for value-added tax, the VAT registration number;
  • a description of the main characteristics of the financial service to be supplied by the supplier;
  • the total price to be paid by the consumer to the supplier for the financial service, including all related fees, charges and expenses and all taxes paid through the supplier or, if an exact price cannot be specified, the basis for calculating the price so as to enable the consumer to verify it;
  • whenever relevant, a notice indicating that the financial service is related to instruments involving special risks related to their specific features or the operations to be executed or whose price depends on fluctuations in the financial markets outside the supplier’s control, and historical performances are no indicators for future performances;
  • notice of the possibility that other taxes or costs may exist that are neither paid by the supplier nor imposed by the supplier;
  • any limitation of the period for which information given by the supplier is valid;
  • the arrangements for payment and performance that will apply under the contract;
  • if an additional charge is or is to be imposed on the consumer for using a particular means of distance communication in connection with the contract, the amount of the charge;

Pre-Contract Information III

The following informaiion is also  required;

  • whether or not there is or will be a right to cancel the contract in accordance with the Regulations, and if there is such a right the period during which it can be exercised, and the conditions under which the right can be exercised (including information about any charge that the consumer may be required to pay, and the consequences of not exercising that right;
  • the minimum duration of the contract in the case of a financial service that is to be performed on a continuing or recurring basis;
  • any rights the parties may have to terminate the contract early or unilaterally because of the terms of the contract and any penalty that may be imposed under the contract for early termination;
  • practical instructions for exercising the right to cancel the contract (which instructions must include the address to which notification of cancellation must be sent);
  • the EU Member State the laws of which the supplier adopts as a basis for establishing relations with the consumer before the contract is entered into;
  • any term of the contract dealing with the question of what law is to apply to the contract or which court has jurisdiction with respect to the determination of disputes arising under the contract;
  • the language or languages in which the contractual terms and conditions and the prior information required by are given;
  • the language or languages in which the supplier, with the agreement of the consumer, undertakes to communicate with the consumer while the contract remains in force;
  • whether or not there is an out-of-court complaint and redress process for the consumer and, if there is, the procedure for gaining access to it;
  • the existence of guarantee funds or other compensation arrangements, except to the extent that they are required by the statutory deposit schemes.

In the case of an agreement concluded at a consumer’s request using a means of distance communication that does not enable the Standard European Consumer Credit Information to be provided (in particular, in the case of a credit agreement concluded by means of voice telephony communications), the creditor shall provide the consumer with the full pre-contractual information using the Standard European Consumer Credit Information Form immediately after the credit agreement is concluded.


Furnishing the Information I

The supplier shall make known to the consumer the commercial purpose of the contract, and give that information in a way that is clear and comprehensible, taking into account the means of communication used. In giving that information, it shall comply with all enactments and rules of law that require good faith in commercial transactions or provide protection to those who are unable to give their consent, such as minors.

Information is given in a clear way only if it is easily, directly and at all times accessible to the consumer of the financial service concerned, and can be stored by the consumer in a durable medium.

In giving information about the contractual obligations that would arise under a proposed distance contract for the supply of a financial service, a supplier shall ensure that, as far as reasonably practicable, the information accurately reflects the contractual obligations that would arise under the law presumed to be applicable to the contract assuming it were to be entered into.

A supplier shall keep in a durable and tamper-proof form a copy of all information that has been given to a consumer in relation to a distance contract or proposed distance contract for the supply of a financial service.

Within a reasonable time before entering into a distance contract for the supply of a financial service, the supplier shall give to the consumer, in writing or in some other durable medium and accessible to the consumer all of the terms of the contract, and all of the information required to be given by the supplier.


Furnishing the Information II

If a contract for the supply of a financial service is entered into at the request of a consumer, and the means of distance communication used does not allow the required information about the terms and conditions of the contract and the information to be given, the supplier shall comply with the obligation immediately after the contract is entered into.

If at any time while a distance contract for the supply of a financial service is in force, the consumer so requests, the supplier shall give to the consumer the contractual terms and conditions printed on paper.

If, while a distance contract for the supply of a financial service has effect, the consumer requests the supplier to change the means of distance communication with the consumer, the supplier shall comply with the request unless to do so would be inconsistent with the contract or the nature of the service.

A distance contract for the supply of a financial service is not enforceable against the consumer if the supplier has failed to comply with an obligation imposed on the supplier by this Regulation.

A term or condition of a distance contract for the supply of a financial service is void if it purports to impose on the consumer the burden of proving that the supplier has complied or not complied with an obligation imposed on the supplier by the Regulations.


Consumer’s Right to Cancel

A notice of cancellation must be given in writing, or in some other durable medium that is accessible to the supplier, and clearly shows that the consumer intends to cancel the contract. A distance contract for the supply of a financial service is cancelled when a notice of cancellation is properly given by or on behalf of the consumer to the supplier within the permitted cancellation period.

The cancellation period for a distance contract for the supply of a financial service begins on the day when the contract is entered into, or on the day on which the consumer is given the contractual terms and conditions and the required information, whichever is later.

Except as provided otherwise, the cancellation period for the contract ends 14 days after the beginning of the period. The cancellation period for a distance contract for the supply of a financial service does not begin until the supplier has given to the consumer, either on paper or in some other durable medium that is accessible to the consumer, all of the information required to be given.xceptions to the Right to Cancel

A consumer does not have a right to cancel a distance contract for the supply of a financial service by giving a notice of cancellation in several cases including where

  • the price payable for the service depends on fluctuations that may occur in the financial market during the cancellation period and such fluctuations are outside the supplier’s control,
  • the contract under which the service is supplied was entered into at the consumer’s request and has been fully performed by both parties before the consumer gave notice of cancellation,
  • the service is or relates to the provision of a housing loan.

Effect of Cancellation I

If a distance contract for the supply of a financial service is cancelled in accordance with this Part, the supplier under the contract shall refund all money paid by or on behalf of the consumer under or in relation to the contract, less any charge imposed in accordance with the Regulations.

On cancellation of a distance contract for the supply of a financial service contract in accordance with the Regulations, any instrument under which security is provided to secure the performance of the consumer’s obligations under the contract is to be treated as never having effect. Certain related contracts are also to be automatically cancelled

If any security or other property has been lodged with the supplier or any other person to secure the performance of those obligations, the supplier or other person shall promptly (and in any case within 30 days after cancellation of the contract) return the security or property to the person who lodged it or that person’s nominee.


Effect of Cancellation II

Despite the cancellation of a distance contract for the supply of a financial service, the supplier is entitled to impose a charge for any service actually supplied in accordance with the contract. However, such a charge must not exceed an amount that is proportionate to the value of the service that was supplied to the consumer before the notice of cancellation took effect, or be an amount that could constitute a penalty. The supplier may impose such a charge only if the consumer had already been informed of the amount of the charge.

On cancelling a distance contract for the supply of a financial service, the consumer shall refund any money paid by or on behalf of the supplier under or in relation to the contract to the person who paid the money, and restore to the person from whom it was received, or that person’s nominee, any other property of which the consumer has acquired possession under the contract.

The consumer shall make the refund and restoration as soon as practicable (and in any case not later than 30 days) after the day on which the notice of cancellation was given to the supplier. If the consumer fails to refund money or restore the property, within the period of 30 days the supplier has the same rights with respect to recovery of that money or property as the supplier would have had if the contract had not been cancelled.