New FSA proposals for cross-border financial services shopping from home
03/09/2003
The FSA is today setting out its proposals to implement a European initiative the Distance Marketing Directive (DMD) to encourage cross-border financial services home shopping.
The DMD aims to provide increased protection, and greater choice, for consumers throughout the European Economic Area (EEA) by:
setting minimum standards for information that must be provided to consumers before entering into a financial services contract by distance means; and,
for a range of products and service, giving a cooling-off period (14 or 30 days) in which a consumer may, without penalty, cancel such a contract.
Once the proposals are implemented across Europe consumers buying retail financial services or products by post, fax, internet and telephone will be given common rights and protection when dealing with any financial services firm within the EEA. But, until other European states have put the protections in place, UK rules will continue to apply to European firms dealing with UK consumers.
For UK firms, the FSA is proposing amendments to its rules. Firms conducting designated investment business at a distance are already subject to detailed FSA rules for these activities. For these firms the structure of the rules will remain largely unchanged, but there will be a number of changes of detail. For deposit-taking by banks, building societies and credit unions and for e-money issuers, the FSA is proposing new rules on pre-contract information and cancellation rights under the DMD.
The FSA is responsible for implementing the Directive for those firms and activities it already regulates or, in the case of first charge mortgages and general insurance, it will regulate in future. The Department of Trade and Industry (DTI) will implement the Directive for consumer credit, second charge mortgages and related activities.
Notes for editors
Consultation Paper 196 Implementation of the Distance Marketing Directive: proposed rules and guidance is available on the FSA website www.fsa.gov.uk/pubs/cp/196 . The timetable for consultation and making rules is:
2 December 2003 - closing date for responses to the CP;
March/April 2004 - publication of our Policy Statement with made rules;
9 October 2004 - new rules to take effect.
FSA published a Discussion Paper (DP) in March 2003 which looked at the main provisions of the Distance Marketing Directive (DMD).
The European Parliament and Council adopted the Distance Marketing Directive (DMD) on 23 September 2002. It must be implemented by 9 October 2004. A copy of the DMD may be found at Annex 5 to the Consultation Paper.
The European Economic Area (EEA) comprises the member states of the European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom) together with Iceland, Norway, and, Liechtenstein.
The Treasury have overall UK responsibility for implementation of the DMD. On 18 July 2003 they issued their own Consultation Document seeking responses on their proposed overall approach to implementation and on draft implementing regulations. The Treasury consultation closes for responses on 17 October 2003.
FSA is consulting separately on conduct of business rules for general and pure protection (other than long-term care) insurance, (see CP187: Insurance selling and administration & other miscellaneous amendments).
From 31 October 2004 FSA will regulate mortgage advice, arranging, lending and administration in relation to most first charge mortgages. In May 2003 FSA published CP186 (Mortgage regulation: Draft conduct of business rules and feedback on CP146), its consultation on draft conduct of business rules for its new mortgage regime, which will implement the DMD for those activities.
The DTI is responsible for implementing the DMD for activities within its consumer credit regime. For financial services that fall within neither the DTI nor the FSA regimes, HM Treasury propose to split enforcement responsibilities between the FSA and the DTI.
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.
The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.