The European Commission is proposing to update and move the requirements in the current directive on the distance marketing of consumer finance services. The revised rules - summarised below - will become part of the Consumer Rights Directive (CRD). Public consultation recently closed and the next step is a first reading in the European Parliament. Member states will have 24 months from final publication to transpose the changes at national level on a maximum or 'full' harmonisation' basis, so member states can only diverge to the extent that the CRD permits.  The new approach represents a significant extension to the current requirements, particularly where there is no existing requirement for pre-contract information, a right of withdrawal and/or adequate explanations to consumers. We will update you on the transposition of these changes in Ireland in due course. If you have any queries, please let us know.

Summary of provisions

The current proposal would mean that certain CRD provisions will also cover distance contracts for financial services, with some specific additional provisions in a new financial services chapter. A 'distance contract’ is: 

"any contract concluded between the trader and the consumer under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded." 

The new requirements involve:

  • extensive pre-contract information requirements relevant to distance contracts for various types of financial services (unless the pre-contract information for the specific financial service is already covered by other EU legislation);
  • continuing the right of withdrawal from a distance contract for financial services within 14 days, but with a clearly labelled 'withdrawal button' for contracts concluded electronically (unless the right of withdrawal for the specific financial service is already covered by other EU legislation);
  • a requirement for consumers to pay for any service(s) actually provided under the distance contract prior to withdrawal (but not by way of penalty), subject to the return of any other sums received by either the trader or consumer within 30 days of withdrawal; 
  • 'adequate explanation' for the consumer on the proposed financial services contract to enable the consumer to assess whether the services, distance contract (and any ancillary services) are adapted to the consumer's needs and financial situation (unless the need for an adequate explanation for the specific financial service is already covered by other EU legislation) .

The right of withdrawal will not apply to consumer financial services whose price depends on fluctuations in the financial market outside the traders control, which may occur during the withdrawal period (examples are listed); travel and baggage insurance policies or similar short-term insurance policies of less than one month's duration; or contracts whose performance has been fully completed by both parties at the consumer's express request before the consumer exercises his right of withdrawal.

Conclusion

This represents a significant extension to the current distance marketing requirements, assuming that there is not already a requirement for pre-contract information, a right of withdrawal and/or adequate explanations for the relevant financial service under current national or EU requirements (such as those relating to consumer credit). 

We will update you in due course on the transposition of these changes in Ireland. If you have any queries, please let us know.