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Cancellation and the cancellation period under the Financial Services (Distance Marketing) Regulations

The Financial Services (Distance Marketing) Regulations

The Financial Services (Distance Marketing) Regulations first came into effect in 2004 and are designed to give effect to the European Union’s Directive on the Distance Marketing of Financial Services.

What is the reason for the Financial Services (Distance Marketing) Regulations?

The Financial Services (Distance Marketing) Regulations not only provide consumers of financial services sold by distance marketing techniques by ensuring that the consumer is provided with certain information they also provide the consumer with specific rights in relation to the cancellation of the contract.

Cancellation Rights under the Financial Services (Distance Marketing) Regulations

The Regulations enable consumers to cancel a contract related to financial services entered into at a distance during a specific cancellation period.  Cancellation during this period will terminate the contract completely.

What is the cancellation period?

The cancellation period will begin on the day that the contract for the financial services has been concluded and will come to an end 14 days after that date.

At what point is the contract concluded?

The contract will be concluded at the point at which all of the prior information has been sent to the consumer entering into the contract as specified by the Regulations.

Does this cancellation period apply for all contracts regarding financial services?

The exception to the rule is whereby the contract is in relation to life insurance and pensions. For contracts of this nature the cancellation period provided to the consumer will be 30 days from the conclusion of the contract rather than the standard 14 days. Furthermore for contracts which relate to life insurance the contract will be deemed to have been concluded from the date that the consumer is informed that the contract has concluded rather than the date they receive all of the information.

How will the consumer be able to cancel the contract during the cancellation period?

The consumer can cancel the contract during the cancellation period by providing the supplier with a cancellation notice.

When will a cancellation notice be deemed to have been properly given to the supplier?

A cancellation notice will be deemed to have been properly given to the supplier by the consumer where the consumer delivers, faxes or emails it to the supplier. Furthermore the consumer may also send the notice to a website if the supplier has indicated to the consumer that the website may be used for this purpose.

In some instances the supplier might also indicate to the consumer that notice of cancellation can be given over the phone. If this has been the case it will be regarded as an acceptable method of cancellation for the consumer to do this. However, if this has not been stated by the supplier the consumer will not be able to give notice of cancellation over the telephone.

Are there any exceptions to the right to cancel of the consumer?

In certain situations it will be regarded as unreasonable to enable a consumer to cancel a distance contract for financial services. One of the best examples of this is where the contract relates to travel or holiday insurance. If a consumer was provided with the usual right of cancellation in this case then they could easily go away on a short break getting the benefit from the insurance and then cancel it upon their return.

Accordingly a consumer cannot cancel a distance contract for financial services in the following scenarios:

• A contract which specifically relates to a financial service where the price of the service depends on fluctuations in the financial markets which are out of the control of the supplier

• A contract which has been fully concluded by both parties at the consumer’s express request before the consumer gives notice of cancellation to the supplier

If I choose to cancel a distance contract for financial services will I be entitled to claim back any money spent?

In the circumstance whereby a consumer cancels a contract within the cancellation period the supplier must refund any sum which has been paid on the behalf of the consumer minus any charge made under the contract.

When will I expect to be provided with my refund?

If a distance contract for financial services has been cancelled during the cancellation period any money due to be refunded should be done as soon as is reasonably practicable and within 30 days from the cancellation date.

Will a consumer be able to cancel the contract after the expiration of the cancellation period prescribed by the regulations?

The cancellation period stated above has to be in operation by law due to the Regulations, however, whether any contract can be cancelled after this period will depend upon whether any further cancellation provisions are provided for in the terms and conditions of sale. As this is not required by the Regulations whether this is possible will depend entirely on the specific terms and conditions put in place by that supplier.

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