DTI Issues Distance Marketing Directive Regulations

by Robin Pilgrim, LawAndTax-News.com, London

16 August 2004

The UK's Department of Trade and Industry (DTI) has published Regulations to implement the EU Directive on Distance Marketing of Consumer Financial Services, covering the sale of pensions, mortgages and other financial products on-line or by telephone, fax or mail.

The Regulations deal mainly with pre-contract disclosure, setting common standards for the information that must be supplied to consumers of financial services prior to a contract being concluded at a distance. They do not cover sole traders, partnerships or unincorporated associations, because the Distance Marketing Directive was targeted at consumers based on the European Commission’s definition. UK domestic legislation historically has a broader definition of consumer that includes the aforementioned businesses, but the Government's view, supported by business lobbies, was that there was no need to regulate further than the Directive required as there was no identified detriment requiring attention.

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.

Under the Regulations, the following must be disclosed to the consumer in all distance sale consumer credit contracts:

• the identity of the supplier, including details of any professional the consumer deals with instead of the supplier;
• details of 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
• 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 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 for those investments, such as unit trusts, which are subject to movements in the stock market.

The provisions in relation to disclosure 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 rules relating to cancellation will come into force on 31st October for both regulated and non-regulated consumer credit contracts.

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