UK: Distance Marketing of Financial Services Directive 2002/65/EC

Last Updated: 30 November 2002

In the November 2001 IT Bulletin we discussed the early draft of this Directive and the first stages of its passage through the EU legislative process. The new Directive has now finally been passed by the EU and entered into force on 9 October 2002. Member States will now have until 9 October 2004 to pass domestic legislation implementing the Directive.

The new Directive should not be confused with the Distance Selling of Consumer Goods Directive that was passed in 1997 and entered into force in 2000. That Directive is similar in some respects but it does not cover financial services since they were considered to require a separate set of rules. The new Distance Selling of Financial Services Directive fills that gap. Both Directives only protect natural persons in their capacity as consumers and do not protect individuals if they are acting in a professional capacity.

The new Directive regulates the marketing of financial services by means of distance communication. "Financial service" means any service of a banking, credit, insurance, personal pension, investment or payment nature. "Means of distance communication" is defined as any method of communication where the parties are not simultaneously present e.g. telephone, fax, traditional mail, proprietary computer networks and the internet. There are five key features of this new Directive:

A prohibition of "inertia selling"

Inertia selling is the marketing practice of supplying financial services to a consumer without a prior request on his/her part and including a request for immediate or deferred payment. Under the Directive a failure of a consumer to respond after receiving such unsolicited financial services cannot be taken to be consent.

Regulation of direct marketing (including cold calling and spamming)

It is an opt-in system (prior consent of the recipient is required) in relation to sending unsolicited faxes or using automated calling systems for direct marketing of financial services. Member States have been given the option to choose between opt-out (prior consent of the recipient is not required) and opt-in in relation to all other forms of direct marketing e.g. email and mobile phone text messaging. However to be consistent with the new Privacy and Electronic Communications Directive, direct marketing of financial services by email, fax, mobile phone text messaging and non-automated telephone calls will need to be opt-in unless it is an email or text message to an existing customer.

Whether an opt-in or opt-out system is used by the Member States there must be no cost to the consumer.

An obligation to provide consumers with comprehensive information

In general before a contract is concluded a consumer must receive in a durable medium all of the information specified in Article 3 relating to the supplier, the financial service, the distance contract and means of redress as well as any other prior information required by Community or domestic legislation. "Durable medium" means any instrument that enables the consumer to store information and access it in the future e.g. floppy discs, CDROMs, DVDs and the hard drive of the consumer's computer on which the electronic mail is stored. It does not include Internet websites unless they fulfill the criteria contained in the definition of a durable medium.

Cooling-off period

After the conclusion of a financial services contract by means of distance communication the consumer will have a period in which they can withdraw without penalty and without giving any reason. If it is a life insurance contract or a personal pension they will have 30 days but for other types of financial services it is 14 days. There are a number of types of product that will not be subject to a cooling off period including where there is a risk of price fluctuations in the financial market, insurance policies of less than a month (e.g. travel and baggage) and contracts completed at the request of the consumer within a month. Member States may provide that contracts for credit related to property or immoveable property will also not be subject to a withdrawal period.

The refund for financial services contracts cancelled within a cooling off period must be made within 30 days and the quantum correspond to the formula in the Directive.

The Directive’s effect cannot be negated

Consumers cannot waive their rights under the Directive. If it is clear there is a close link with an EU Member State the Directive’s affect cannot be negated by the relevant financial services contract merely specifying the laws of a non-EU Member State should apply. As a further protection to consumers, Member States must ensure one or more of the following types of organisation can also take court action to enforce compliance – public bodies, consumer organisations and professional organisations.


Most businesses would be already familiar with similar information provision requirements and direct marketing restrictions as a result of similar provisions in the existing Distance Selling of Consumer Goods Directive and various privacy related Directives. Where this new Directive differs from many others is that it is one of the most prescriptive to come out of the EU in recent years. It leaves little scope for variation when the Member States implement it. Businesses offering financial services to consumers in multiple EU countries may welcome the new Directive as a step towards increasing the level of harmonisation of financial services regulation across the EU. The sting in the tail of the Directive however is that it ensures that consumer protection watchdogs are able to ensure that regulation is complied with by business. Financial service providers will therefore need to make compliance a priority.

© Herbert Smith 2002

The information contained in this article is of a general nature. and should not be relied on in that way. Specific advice should be sought about your specific circumstances

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.