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The Distance Marketing of Financial Services Directive (DMD) establishes a set of EU-wide rules on the information that must be supplied to consumers when financial services are sold at a distance.
The Financial Services (Distance Marketing) Regulations 2004 which implement the Directive came into force in October 2004. HM Treasury leads on financial services issues in Whitehall.
The requirements regarding pre contract information relating to regulated consumer credit agreements were implemented on 31 May 2005. This tied in with when the Consumer Credit (Disclosure of Information) Regulations 2004 introduced pre contract information requirements for non-distance contracts. The DMD’s 14 day cancellation rights for distance contracts were introduced on 31 October 2004.
There are some key points you may wish to note:
To avoid duplicating the regulations by Her Majesty’s Treasury (HMT) implementing the DMD generally (save as implemented by Financial Services Authority rules), the Government decided to incorporate the relevant consumer credit provisions within the HMT Regulations.
The regulations adopt a "copy out" approach. This means they largely copy out key text from the DMD rather than attempt a redraft that might give rise to a different interpretation.
The Regulations do not extend to covering sole traders, partnerships or unincorporated associations. This is 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. In this case, the Government view was that there was no need to regulate further than the Directive required as there was no identified detriment requiring attention. Indeed, any business lobbying received was in support of "no such gold plating".
These Regulations require pre contract information, as described in article 3 of the DMD, for all distance sale consumer credit contracts. For non-regulated consumer credit, this was introduced on 31 October 2004. The information can be incorporated into the credit agreement provided it is given to the consumer "in good time" before the contract is concluded. This complements the pre contract information requirements for non-distance regulated consumer credit agreements under the Consumer Credit (Disclosure of Information) Regulations 2004.
Both distance and non-distance pre contract information for regulated consumer credit agreements are required from 31 May 2005 save as set out in the next paragraph.
The required pre contract information includes information as to the new cancellation rights mentioned below. That part of the pre contract information requirements, but only that, will apply in respect of regulated consumer credit contracts made on or after 31 October 2004. For full details on the cancellation related information needed to be provided between 31 October 2004 and 31 May 2005 consult Regulation 29 and Schedule 1, paragraph 13, in particular.
The Regulations provide that from 31 October 2004 all credit agreements concluded at a distance with consumers within the meaning of the Directive will be subject to a cancellation period of 14 days from the date the contract was concluded. There are a few exceptions; for example, loans secured by a legal mortgage on land.
The rules concerning cancellation of credit agreements which are not distance contracts have not changed.
We may, in due course, issue further guidance on the provisions of the Regulations.
