Revised distance selling plan fails to satisfy critics

Date: 02/09/1999

By Renée Cordes

EU governments are resisting the European Commission's renewed attempts to limit their power to impose tough national restrictions on the sale of financial services via the phone, mail or the Internet.

Acting Single Market Commissioner Mario Monti's latest version of the proposed 'distance selling' directive, unveiled this summer, seeks to win over opponents of the plan by suggesting additional measures to protect consumers against potential fraud. He has, for example, proposed giving borrowers the right to withdraw from contracts without having to give reasons for doing so or pay a penalty.

But Monti is sticking to his earlier insistence that member states should be banned from adopting more stringent national laws than those agreed at Union level.

Monti's approach, which is supported by the European Parliament, is aimed at ensuring a single market in banking, insurance and other retail financial services while promoting a high level of consumer confidence.

However, a majority of member states such as France, Germany and the UK are refusing to back down from their call for the right to keep their more restrictive laws in place. The impasse means agreement on the proposals remains a long way off.

"There are elements in the proposal that might make the whole thing easier for member states to digest," said an EU diplomat, pointing to the proposed new general right to withdraw from contracts. "But there is still one basic problem. I do not know whether member states are willing to accept full harmonisation or whether the Commission can accept minimum levels of harmonisation."

The Commission had previously proposed giving borrowers a restricted right of withdrawal, but only in cases where the financial service provider had either unfairly induced the consumer to sign the contract or did not disclose the terms of the deal. Under the original plan, consumers would not have been able to break off all contracts, however, with those involving foreign exchange services, short-term non-life insurance and certain kinds of mortgages excluded from the scope of the planned rules.

While banking groups have welcomed the Commission's latest draft as a good basic legal framework, consumer groups are pressing governments to continue to fight for the right to impose stricter national legislation.

"This is a very fast-moving area and if you are going to have any changes in the law it is more likely to come from one member state at a time than from all 15 at once," said Jim Murray, head of the European consumer lobby BEUC.

But Jaap Kamp, senior executive vice-president at ABN Amro's office in Brussels, disagrees.

"We appreciate high consumer protection, but we would not like to run into different rules in different countries," he said "The burden of proof is now on countries who say there is not adequate consumer protection."