The Internal market, Tourism and Consumer Affairs Council
yesterday reached a political agreement on common rules for selling
contracts for credit cards, investment funds, pension plans, etc.
to consumers by phone, fax or internet.
The main features of the new proposals are:
- The prohibition of abusive marketing practices seeking to
oblige consumers to buy a service they have not solicited (known as
"inertia selling");
- New 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
speculation.
The newly agreed standards are in line with those already
applicable to all other retail sectors. The Council is now to adopt
its Common Position on the proposed Directive shortly, and will
proceed with its final adoption once the European Parliament has
concluded its second reading on the proposal.
Health and Consumer Protection Commissioner David Byrne
said:
"This is a major breakthrough that will
provide consumers with much needed protection and rights. Distance
marketing is currently dominated by classical techniques such as
mail and telephone. But the directive is also a key step in
creating a regulatory framework to build consumer confidence in
e-commerce, inside a consumer's Member State or across borders.
"The directive fills a 'legal gap' in
existing consumer protection legislation, left by the exclusion of
financial services from the 1997 Directive on distance
selling."
Commissioner Frits Bolkestein, responsible for the Internal
Market, added:
"The adoption of harmonised rules across the
EU will make it easier for both consumers and suppliers to cross
national boundaries in an environment of greater legal security and
confidence. That is especially true for internet trade for which
financial services are especially well suited. This Directive is an
essential complement to the E-commerce Directive which was adopted
last year and which will enter into force this coming January."
Distance marketing means selling by telephone, fax, proprietary
computer networks and the Internet. A Directive regulating the
distance selling of (all other) goods and services was adopted in
1997 and entered into force last year. You can find out more about
it in our article (based on the UK’s implementation of the
Directive). Financial services were excluded from its scope since
they were considered to require a separate set of rules.
Opt-in or opt-out option for Member States
The agreed text sets out two options for rules Member States are
to apply with respect to the use of cold calling, the same practice
by telephone, and spamming, unsolicited communication by e-mail.
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 in a
registry set up for this purpose.
Information to be provided
Sellers of financial services and products will also be obliged
to provide consumers with a comprehensive package of information
before an eventual contract is concluded. This package 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 Community legislation.
14 or 30-day cooling off period
The text will also give consumers 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 however not
apply to financial services that may be subject to price
speculation, 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.
Today's political agreement is an essential part of the
Commission's strategy to develop an Internal Market for retail
financial services. That strategy was set out in the recently
adopted Commission Communication on E-Commerce and Financial
Services. It aims to create a regulatory environment that
encourages the development of e-commerce in financial services and
to build consumer confidence.
Underpinning the strategy is a series of measures designed to
enhance consumer confidence and protection, including further
harmonisation of national consumer and investor protection rules,
the establishment of out-of-court redress, measures to build trust
in internet payments and enhanced co-operation between public
authorities responsible for the supervision of cross-border trade
in financial services. The Commission has also highlighted a number
of the key planned measures in the statement that is part of the
compromise text agreed today.
The proposal for this Directive was put forward by the
Commission in 1998, and modified after first reading in the
European Council and Parliament in 1999. It is to be finally
adopted by the Council once the European Parliament has concluded
its second reading in the framework of the so-called "co-decision
procedure".
The Commission states that, by virtue of their intangible
nature, financial services are particularly suited to distance
marketing, particularly, it believes, by e-commerce. In its
statement, the Commission concludes:
"An offer, even a draft contract, may be put
on a web site and exchanged by e-mail; it may be signed by
e-signature and be paid by electronic means. E-commerce may
therefore revolutionise the provision of financial services,
especially cross-border within the Internal Market. Building the
regulatory framework that will convince consumers that it is safe
to enter this market has therefore for some years been a Commission
priority."
