Consumers of financial services and products offered via distance will get stronger rights to cancel their contracts under rules outlined today in the FSA's Policy Statement 04/11, which contains feedback on CP 196 Implementation of the Distance Marketing Directive .
FSA Handbook changes resulting from PS 04/11 will generally leave firms providing retail services “unaffected”, the regulator says, yet it also urges firms to “where appropriate change their systems and processes and documentation”.
Services providers should also be aware the FSA is allowing firms to accept oral cancellation of contracts, although there will be no requirement to offer such a cancellation method.
Terms of business, product disclosure requirements and financial promotion rules are all beefed up in addition to stronger cancellation rights, the FSA adds.
One priority of CP 196 was to offer a definition of distance marketing to allow firms to ensure they were operating in accordance with the rules laid down by the directive.
PS 04/11 offers a conclusive definition, according to the FSA, which is:
"a distance contract where a retail customer receives information through the post, by distribution on the street, through press, television, radio or internet advertising (or receives none at all) and then deals with the firm solely by one or means such as post, internet, fax, or telephone.”
Additionally, distance marketing covers face-to-face meetings, whether in the adviser’s offices or in the client’s home, including the use of, for example, stakeholder decision trees.
The FSA says it has provided a way around the directive’s lack of distinction between execution-only services and others, by amending its Conduct of Business rules to enable providers of such services to avoid repetition of, for example, key facts. This will enable execution-only services providers to engage with customer without multiplying costs.
Proposals in CP 196 to end the option of post-sales rather than pre-sales cancellation rights for pension transfers and annuities has met with opposition in feedback received by the FSA, the regulator admits.
Therefore, it now proposes to continue allowing such cancellation rights.
Feedback from responses to CP 196 also indicated large industry resistance to the idea providers of fixed rate deposits and unit-linked accounts be required to offer a 14-day right of withdrawal.
Such a move would impact on the available rates, and could lead to losses if market rates moved significantly within the 14-day period.
The FSA says enforcement of cancellation rights in this area “would not benefit consumers as a whole”, which is why it is proposing to enable firms to offer such rights on a voluntary basis.IFAonline
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