Accord on ‘distance selling’ rules remains a long way off

Date: 13/07/2000

By Renée Cordes

AFTER more than two years of talks on planned new EU-wide rules to govern the sale of financial services via the phone, mail or the Internet, the European Commission is aiming to get it right the third time around.

But it will not be easy. The first two proposals for regulating the burgeoning 'distance selling' sector failed to satisfy both consumer champions concerned that borrowers' rights would not be adequately protected and financial institutions worried about strict measures which would hamper their ability to do business.

The Commission finally asked member states to provide details of the laws they already have in place to be used as a basis for yet another proposal, expected later this year. If all goes according to plan, Union governments will reach an accord before the end of this year.

What is likely to emerge is a proposal which pleases everyone but does not accomplish a great deal. Experts predict that some member states will have to raise their level of consumer protection by, for example, ensuring that borrowers receive a minimum level of information before making purchasing decisions. But those with such legislation already in place are unlikely to be allowed to introduce tougher measures. After all, the whole point of the directive is to bring order to the current patchwork of national laws.

The aim of the planned measures is to harmonise national laws governing the 'distance selling' of financial services to encourage cross-border activity while at the same time ensuring that consumers are adequately protected regardless of where the financial institution whose services they use is located.

The Union executive came forward with its first proposal in October 1998, followed

by a second nearly a year ago. Under the latest version, companies using distance-selling techniques would be allowed to operate across all 15 member states as long as they complied with key consumer protection requirements, the most important of which relates to the provision of information to clients.

Luxembourg, France, the UK and the Netherlands welcomed this approach, but other countries argued that they should be allowed to impose additional consumer protection requirements. EU governments are also strongly divided over the scope of the proposal and the degree to which exemptions should be granted for specific financial products such as mortgages.

Pressure is mounting on the Union to put legislation in place to govern these kinds of sales as advances in technology make it increasingly possible for an industry which until fairly recently relied heavily on face-to-face contact with customers to sell financial products to clients hundreds or even thousands of kilometres away.

After more than two years of talks on planned new EU-wide rules to govern the sale of financial services via the phone, mail or the Internet, the European Commission is aiming to get it right the third time around. Article forms part of a survey on financial services.