On 1 January 2006 the Belgian Act of 24 August 2005 concerning the distance marketing of consumer financial services (“the Act”) came into force. This Act – very late - implements the EU Directive 2002/65 of 23 September 2002 (‘the Directive’) which had to be implemented by the Member States no later than 9 October 2004. Its provisions will only apply to consumer sales contracts regarding financial services concluded after this date.
The Act relates to distance contracts concerning financial services, including any banking, credit, insurance, individual pension, investment or payment services, entered into between a supplier and a consumer under an organized distance sales or service-provision scheme run by the supplier, who, for the purpose of that contract, makes exclusive use of one or more means of distance communication, i.e. by means which do not require the simultaneous physical presence (such as telephone, fax or the Internet), up to and including the time at which the contract is entered into.
In the case of contracts for financial services comprising an initial service agreement followed by successive operations of the same nature performed over time, the provisions of the Act shall apply only to the initial agreement.
First of all, the Act supplements the provisions of the Trade Practices Act, which in line with Directive 97/7/EEC, already established distance selling rules for goods and services other than financial services. It provides for the following rules:
- a prohibition of the use of automated distance communication systems without human intervention, such as automatic calling systems or faxes without the consumer's prior, specific and informed consent (“cold calling”).
- the consumer’s right on obtaining certain information before the conclusion of the contract or the acceptation of an offer from the supplier,
The consumer has to be informed amongst others, about the identity and address of the service supplier, his local representative or his reseller; the competent supervisory authority; the main characteristics of the financial service, total price or at least the calculation method; any risks connected to the financial instruments; the minimum duration and cancellation of the contract and on the existence, duration and modalities of the withdrawal right; the applicable law, the jurisdiction and about the existence of any complaints and redress procedures.
Such information has to be communicated in an unambiguous, transparent and comprehensive fashion in a way adapted to the chosen communication technique. Moreover, the pre-contractual information must precisely reflect the contents of the contractual rights and obligations. In case the communication runs via voice telephony only, the supplier may limit itself to a more limited array of information but only on the condition that the consumer explicitly consents so.
- the consumer’s right of withdrawal, i.e. the right to withdraw from the contract without penalty and without giving any reason during a “cooling-off” period of 14 calendar days, running from the signature date of the contract or from the date on which the contractual terms and conditions and the specific information as described before, have been communicated to the consumer, whichever is the later. If the consumer exercises his right of withdrawal after having already agreed to the partial performance of the service, he may be required to pay the supplier in proportion to the service rendered.
The Act provides for three exceptions to the withdrawal right ; this right cannot be applied to:
i) services for which the price is subject to fluctuating actions as a result of developments on financial markets (e.g. securities, futures, equity swaps, etc);
ii) services that have been rendered in their entirety before the right of withdrawal is exercised;
iii) mortgage loans.
The Act stipulates that the burden of proof in respect of the supplier's obligations to inform the consumer and the consumer's consent to conclusion of the contract and, where appropriate, its performance, is exclusively placed on the supplier. Any contractual term or condition providing that the burden of proof thereto should lie with the consumer shall be considered an unfair term which is null and void. A consumer may not waive the rights conferred on him by this Act, nor lose the protection by virtue of the choice of the law of a non-member country as the law applicable to the contract. Indeed, if it is clear that in the absence of such an election of law clause, the sales contract would be governed by the law of a Member State offering more consumer protection than the chosen law, then that election of law clause shall be deemed null and void.
Via the insertion of its main provisions into the Trade Practices Act, the Act ensures adequate and effective complaints and redress procedures for the settlement of disputes between a consumer and a supplier.
Furthermore, the new Act also modifies several other existing acts, the Consumer Credit Act and the Land Insurance Act, providing for similar rights of withdrawal. As an exception to the general rule of 14 days, for life insurances the statutory withdrawal period consists of 30 days. For some other types of insurance, such as travel and luggage insurances or other short term insurance policies with of less than one month, the consumer can not invoke any statutory withdrawal right.
As a general conclusion, it is expected that the Act will succeed to ensure a higher level of protection for consumers of retail financial services and provide financial service suppliers with a more clearly defined legal framework.