Financial Products and Distance Selling
As consumers turn ever more towards purchasing financial products online (a trend that will no doubt accelerate with Covid 19), it is no surprise that the issue of how consumers are protected when purchasing online is a live issue. Financial products are being bought online by new types of customers, below we examine a number of key issues surrounding these financial products and their distance sale.
For example, when a company sells consumer finance online, there are particular European Regulations, the “EC (Distance Marketing of Consumer Finance) Regulations 2004″ which govern this process. These regulations apply to any transactions which occur ‘at a distance’.
In this article, we examine a few of the key issues we have come across with the sale of consumer finance at a distance, and outline some issues that arise for both business and consumer in this space.
1. What is the ‘distance sale’ of a consumer finance product?
A useful approach in attempting to understand the above is to cross-compare the position taken by both the implementing regulations in Ireland and the UK.
The definitions of ‘distance contract for the supply of a financial service’ are similar in both jurisdictions, and both apply their respective rules exclusively to contracts for financial services concluded in a way which has involved no simultaneous physical presence between the parties before the contract is made (in other words no face-to-face contact).
In the UK, the Financial Conduct Authority takes the position of there being no ‘distance contract’ if there has been any personal presence on the part of the consumer on the premises of the seller, no matter how perfunctory and impersonal.
In Ireland, the same approach is taken. As an example, AIB policies on the Directive/Regulation note the following; ‘If you are a consumer and have opened a Personal Current Account without any face to face contact with us you have the right to withdraw from and cancel the agreement without penalty within 14 days of opening the account by contacting your local Branch’, while Irish Life note that ‘Once a face-to-face meeting has taken place in the course of arranging the contract, it is not considered a distant sale’.
2. How then does the 14 day cooling-off period operate?
Outside of some very limited exceptions (such as immediate acceptance and completion of the financial service) the 14 day cooling-off period will always apply. It is also important to note that, under section 30 of the regulation, a consumer cannot waive their rights;
30. (1) Any purported waiver by a consumer of a right conferred on consumers by these Regulations is void.
The EU directive itself notes the inability for consumers to waive their rights under the contract, at article 12.
3. But what if I use an intermediary?
In some instances, it may be the case that the finance product is sold through an intermediary, and that in order to complete the sale of the product a consumer must physically present and sign documents.
In this circumstance, the contract is signed after there has been face-to-face interaction, which could result in the contract falling outside the scope of the regulations. This is where things become even more complicated.
While the UK regulations apply whether the face-to-face interaction occurs directly with the provider of the financial product, or through any intermediary, it could be argued that this is not explicitly provided for in the Irish regulations.
Instead, the Irish regulations use of the term ‘agent’ throughout, which includes intermediary in its definition. However many companies, for various reasons to do with the application of the law of agency in Ireland, specifically call out in their contracts that third party suppliers with whom they interact, even as intermediaries, are not agents in the legal sense of the term.
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The material contained in this post is for general information purposes only and does not constitute legal advice. Specific legal advice should be sought on any particular matter. No liability whatsoever is accepted by PF Solicitors for any action taken in reliance on the information in this post.