New UK FSA Proposals For Cross-border Financial Services Shopping From Home

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.