What issues do I need to be aware of when distance marketing financial services?

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 regulations?

The reason for the Regulations being implemented is to enable the consumer to be protected by ensuring that the supplier discloses sufficient information both before and after the contract is concluded.

Furthermore the consumer must also be provided with the opportunity to withdraw  from the concluded contract without any liability being imposed on them during a specific cancellation period – this cancellation period is referred to as a cooling-off period.

What is meant by financial services for the purpose of the Regulations?

Examples of financial services for the purpose of the Regulations can include the following things:

  • Pensions

  • Mortgages

  • Insurance

  • Banking services

  • Any other services concerned with finance

The definition of financial services used by the Regulations is a wide definition so those individuals who are marketing services which they believe may be regarded as financial by the Regulations should pay particular attention to the wording of the Regulations to decide whether this is the case.

What is meant by marketing by distance communication?

Marketing by distance communication includes the following things:

  • On-line sales

  • Telephone sales

  • Sales communicated by fax

  • Sales communicated by post

  • Any other form of contract that is concluded whereby the parties do not meet face to face

Do the Regulations apply to all kinds of financial contracts concluded by distance marketing methods?

The Regulations only apply to consumer contracts for financial services concluded by distance marketing methods.

What must I do in order to comply with the Regulations?

Some of the most important aspects of the Financial Services (Distance Marketing) Regulations which must be adhered to by businesses marketing financial services by distance methods relate to the information which must be provided before the conclusion of the contract.

Information provided before the conclusion of the contract

What information must be provided before the conclusion of the contract?

The information which must be provided to a consumer prior to the conclusion of the contract can be broken down into the following three categories:

  • The identity of the supplier

  • The details of the product

  • The particulars of the contract

The identity of the Supplier

The following information in relation to the identity of the supplier must be provided to the consumer before they will be bound by the terms of the contract:

  • The name and main business of the supplier

  • The geographical address whereby the supplier is established

  • Any other address relevant to the relationship with the supplier

  • If the supplier is not based in the same European Union Member State as the customer the identity and address of any representative they do have in that EU Member State

  • Company registration details

  • Details of any supervisory authority such as the Financial Services Authority (FSA) and any applicable registration number

  • Description of the main characteristics of the financial service

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For more information on:

  • The Details of the Product
  • The Particulars of the Contract
  • How can I make sure this information is provided to the consumer?
  • What happens if I distance market my financial services over the telephone and it is not possible to provide all of this information?
  • Terms and Conditions of Sale