Opinion of the Economic and Social Committee on the 'Proposal for a European Parliament and Council Directive concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC'
Date: 1999-04-29
Institutions: European Economic and Social Committee
Subjects: EC Directive, consumer protection, distance selling, financial institution, proposal (EU), provision of services

16.6.1999

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Official Journal of the European Communities

C 169/43

Opinion of the Economic and Social Committee on the ‘Proposal for a European Parliament and
Council Directive concerning the distance marketing of consumer financial services and amending
Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC’

(1999/C 169/15)

On 18 December 1998 the Council decided to consult the Economic and Social Committee, under Article
100a of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 15 April 1999. The rapporteur was Mr
Ataı´de Ferreira.

At its 363rd plenary session (meeting of 29 April 1999), the Economic and Social Committee adopted
the following opinion with 78 votes in favour, 47 against and nine abstentions.

1.

Introduction

1.1.
The Commission has long felt the need to regulate the
distance marketing of financial services at Community level.
The subject has been mentioned in various initiatives, not only
by the Commission, but also by the European Parliament and
the Economic and Social Committee itself, but circumstances
were such that financial services were not included in Directive
97/7/EC of 20 May 1997 on distance selling in general (1).

1.2.
The Economic and Social Committee was actually one
of the bodies most in favour of drawing up Community rules
in this field, given that it had in a way pioneered such an
initiative.

1.2.1.
Indeed, in its opinion on consumer protection and
completion of the internal market of 26 September 1991 (2),
the ESC drew attention to the difficulties encountered by
consumers wishing to make cross-border banking trans-
actions (3).

In its additional opinion on the same subject (4), the
1.2.2.
Committee recognized that it was essential to have common
rules to protect consumers in this area and thus welcomed the
proposed directive on contracts negotiated at a distance, which
included financial services.

(1) The decision to exclude financial services from the Directive on
distance marketing was taken by the Consumer Affairs Council
on 17 May 1995.

(2) OJ C 339/06, 31.12.1991.
(3) The major study by E. Balate, P. Dejemeppe and M. Goyens, which
is annexed to the opinion, drew attention to the lack of binding
rules for financial services, especially cross-border transactions,
welcoming as an important instrument of progress the then
recently submitted draft directive on contracts negotiated at a
distance which, at the time, included financial services.

(4) OJ C 19, 25.1.1993.

1.2.3.
Later, in its opinion on the Commission Green Paper
on financial services (5), the ESC was critical of the fact that the
Green Paper confined itself to distance selling, but, on that
point, took care to emphasize that ‘rules would be applied that
are equivalent to those laid down in the horizontal directive
on contracts negotiated at a distance’, albeit adapted to the
specific characteristics of financial services and with due regard
for the new aspects of selling financial services via information
technology or television advertising, especially by unauthor-
ized intermediaries.

1.3.
There are factors obtaining at the present time which
make the adoption of Community measures in this field a
matter of particular urgency. The euro is currently being
introduced as a single currency in the EU; we are also seeing a
burgeoning of the technological mechanisms and instruments
which characterize the Information Society; we already live in
an increasingly global economy where national borders, both
within and even outside the EU, have less and less significance.

1.4.
All these factors are behind an increased desire and
need to resort to distance marketing, where the parties involved
in cross-border transactions do not deal with each other face
to face, even in the business of consumption. And the world
of financial services, which forms the basis and essential
vehicle for such transactions, is already, and, given the factors
described above, will certainly continue to be an area in which
the demand, supply, negotiation and conclusion of deals
will increasingly happen without the parties involved being
physically present, and even without any actual physical
transaction taking place.

1.5.
The proposal is clearly intended to bring about com-
plete harmonization of the sector in question, that is distance
marketing of financial services to consumers.

(5) OJ C 56, 24.2.1997.

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1.6.
The specific characteristics of financial services and
their immaterial nature, combined with their acknowledged
complexity and importance to consumers, provide justification
not only for proposing special provisions which do more than
simply echo the general provisions applicable to distance
selling, but also for adopting a high level of consumer
protection in the areas to be harmonized.

1.7.
Bearing in mind the specific characteristics of financial
services and the distinctive features of the procedures used in
distance marketing, the proposed directive defines a series of
objectives which it seeks to achieve. These may be summarized
as follows:

g)

the obligation to establish appropriate and effective com-
plaints and redress procedures for the settlement of
disputes arising in this field, particularly within the scope
of Directive 98/27/EC of 19.5.98 (injunctions),

h) a clear inversion of the burden of proof in favour of the
consumer with regard to compliance, by the supplier, with
obligations to provide information and the consumer’s
consent to conclude the contract and its performance.

1.7.1.
to

To ensure that consumers are given the opportunity

2. General Comments

a) examine the contract before giving their consent,

b) compare the offers before making their choice,

c) withdraw when they have concluded a contract without
having been acquainted with the contractual terms and
conditions or when the supplier has unfairly induced them
to conclude a contract during the reflection period.

1.7.2.

To guarantee that suppliers are in a position to

a)

sell without hindrance financial services using a distance
selling method,

b) make the most of the opening up of borders and new

technologies,

c)

conclude distance contracts with consumers.

To achieve these ends, the proposed directive lays

1.8.
down the following guiding principles:

a)

b)

c)

the consumer must be familiar with the terms and
conditions of the contract before signing it,

there must be a guaranteed reflection period during which
the consumer can analyse the contract and compare the
offer made with others on the market,

there must be an established right of withdrawal within a
reasonable period,
in cases where the two preceding
provisions are not respected,

d)

the consumer has a right to be clearly informed of the
rights mentioned in the foregoing paragraphs,

e) a complete ban on unsolicited communications and press-
ure selling of financial services, without the prior and
express consent of the consumer,

2.1.
The Committee feels that measures to harmonize the
distance marketing of contracts are necessary and welcomes
the Commission’s initiative in coming forward with the present
draft directive (COM(1998) 468 final, of 14 October 1998),
which was long overdue.

2.2. While recognizing that transposing the directive is
likely to pose problems and require some adjustments to the
structure and operation of the financial institutions concerned,
the Committee nevertheless feels that the entry into force of
the single currency on 1 January 1999 will help to smooth the
necessary adjustments. It therefore suggests that the three-year
deadline for completion of transposition (until 30 June 2002,
Article 17(1)) be shortened by a year and set at 30 June 2001.

2.3.
The Committee accepts that the scope of the present
draft directive is restricted to the form in which the financial
services mentioned are marketed, deliberately excluding all
other aspects to do with the content of such services, which
will continue to be governed by existing Community rules,
and that it applies solely to transactions between professionals
or suppliers and ‘any natural person (...) who (...) is acting for
purposes which are outside his trade, business or profession’
(Article 2(d)).

However, the Committee feels that the Commission’s
2.3.1.
aims in proposing the present directive will only be achieved
if its scope is limited to situations in which the marketing of
financial services makes exclusive use of distance communi-
cation techniques. The definition of ‘distance contract’ (Article
2(a)) should reflect this recommendation.

2.3.2.
Any overlap with other consumer protection direc-
tives should be avoided. These directives should be made
compatible with each other.

f)

the binding character of all these rights and the rigorous
penalization of commercial practices in contravention
thereof,

Apart from Articles 57(2) and 66, the draft directive
2.4.
refers only to Article 100a on the establishment of the internal
market as its legal basis.

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Although mention of these legal bases is preceded by the
words ‘in particular’ and there is a reference in passing to
Article 129a in the first recital, the ESC feels that express
mention should be made of Article 129(3)(b) of the Treaty
(Article 153 of the Amsterdam Treaty, which comes into force
on 1 May 1999) in the list of legal bases given in the first
paragraph of the proposal.

2.7.2.
The Committee feels that consideration should be
given to including, under the concept of ‘unfair inducement’,
the common practice of advertising or promotional material
being intermingled with the contractual conditions. The two
things should be clearly separate.

2.5.
From this, the Commission should draw an important
conclusion with regard to the type of harmonization proposed
for the directive by introducing a ’minimal clause’, similar to
the one in Directive 97/7/EC, to reflect what is enshrined in
Treaty Article 129a(5). This would give the Member States the
scope to define more stringent protective measures, in line
with the tradition of Community rules in this area, without
detracting from the high level of consumer protection estab-
lished by the directive.

2.6.
The Committee accepts that the scope of the directive
is limited to financial services concluded ‘under an organized
distance sales or service-provision scheme run by the supplier’
and therefore excludes occasional or chance transactions by
operators without an organized scheme (Article 2(a)).

fundamental

legal certainty,

for reasons of

However,
the
Committee feels that the directive must give a precise definition
of both (a) what is meant by ‘an organized scheme’ for the
purposes of this directive, and (b) at what point transactions
cease to be regarded as occasional or chance, thereby obliging
the supplier to actually set up ‘an organized distance sales or
service-provision scheme’.

2.7.
Still on the subject of definitions, the Committee feels
that the draft directive does not define what is meant by ‘unfair
inducement’ (Article 4(2)) in terms of what is permissible.

It is in the very nature of a system of law that illegal practices
are defined within that system. In a directive designed to bring
about total harmonization on such an important point as this
one, with serious implications for the right of withdrawal and
the obtaining of compensation, it does not seem acceptable
that an underlying concept, i.e. the illegal practice of ‘unfair
inducement’, is not precisely described in Community law.

The Committee feels that the term ‘durable medium’
2.8.
needs to be defined more precisely, and recommends including
a more technical and exhaustive definition based on the
elements mentioned in previous ESC opinions, namely the
opinion on electronic signatures (1), the opinion on Safe use of
the Internet (2) or the (draft) opinion on certain aspects of
electronic commerce in the internal market (3).

2.9.
As regards the right of withdrawal, the draft directive
provides no clear definition of whether it is receipt of the
consumer’s communication by the supplier which counts, and
if so, whether receipt by the supplier must be within the period
allowed for exercising the right, or whether it is enough
for the right to be exercised within the period even if a
communication to that effect is received later (Article 4(1), (2)
and (3)).

Bearing in mind that there is no uniform interpretation for
such cases in the Member States, with case law showing a
variety of decisions, the Committee recommends that the
question of communicating the right of withdrawal be clearly
explained so as to avoid doubts about interpretation.

As regards the nature and definition of the periods of
2.10.
time laid down in various provisions of the proposal, the
Committee feels that the periods laid down for exercising the
right of withdrawal (14 days or 30 days — Article 4(1) and
(2)), should not be fixed, but should be taken as a minimum
which can be extended by the Member States if they consider
this necessary to afford greater consumer protection.

The Committee also feels that the nature of the period
2.11.
should be clearly stated in the proposal, i.e. whether the days
are to be counted consecutively, or whether it is only working
days, not counting Sundays and public holidays, and what is
to be done if the last day of the period falls on a Sunday or a
public holiday.

The Committee also feels that in each case where the
2.12.
phrase ‘without any undue delay’ is used, which appears in
various binding provisions (Articles 5(1) and (3), 8(1) and
11(2), second paragraph), a maximum period should be
stipulated, e.g. ‘within 48 hours’ or ‘within a maximum of five
days’, to avoid uncertainty.

2.7.1.
The Committee therefore strongly recommends, not
just for legal reasons but also in the interests of equality and
certainty,
it should not be left to the discretion of
the Member States to determine what is meant by ‘unfair
inducement’, but rather that a precise description by given in
the directive of what constitutes such practice.

that

(1) OJ C 40, 15.2.1999.
(2) OJ C 214, 10.7.1998.
(3) CES 457, 29.4.1999.

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2.13.
It is essential that consumers should have confidence,
access to information and simple, non-judicial, inexpensive
means of redress in the event of disagreement with foreign
service suppliers.

2.13.1.
The ESC therefore stresses the need for the Com-
mission and the Member States to ensure the rapid develop-
ment of cross-border consumer redress mechanisms such as
those which could be provided by a network of national
consumer protection agencies or ombudsmen who would act
as conduits and arbitrators in the event of dispute.

3. Specific comments

3.1.
Article 1(1) — Given that the concepts of ‘approximat-
ing’ laws and ‘harmonizing’ laws are different, the Committee
feels that if the Commission were to opt for total harmon-
ization,
the Article should read ‘to harmonize the laws,
regulations and administrative provisions...’. (1)

Article 1(2) — Bearing in mind the difficulty of making
3.2.
a strict distinction between single contracts and successive
contracts, the Committee feels that the directive should refer
to ‘each new individual and separate contract’.

3.3.
Article 2(a) — The definition of ‘distance contract’
should contain the word ‘exclusive’ before the words ‘use of
means of distance communication...’.

Article 3 — the wording should be tightened up as

3.4.
follows:

3.4.1.
follows:

In point 1, a new paragraph should be added as

‘Until the consumer accepts the contract, no payment, in
any form whatsoever, may be demanded by the supplier.’

3.4.2.
express consent’.

Delete the redundant phrase ‘with the consumer’s

3.5.

Article 4 — should be amended as follows:

3.5.2.
words as ‘The consumer then has a right of withdrawal...’

In the second paragraph of point 1, rewrite the first

In indent (b) of Article 4(1), consideration should be given to
the case of non-life insurance policies ‘taking effect immedi-
ately’, as allowing withdrawal in such cases may constitute
abuse of rights.

3.5.3.
Although not including them in the list of exclusions
to the right of withdrawal, the Committee feels that an explicit
reference is required in the preamble of the directive to
portfolio management services and investment advice with
regard to the financial products referred to in points 5 and 7
of the Annex, specifying that although contracts constituting a
mandate for individualized management of financial products
may always be revoked in general terms, this does not imply
withdrawal
in
connection with the financial products referred to in points 5
and 7 of the Annex.

from contracts concluded, under mandate,

3.6.
Articles 3(3) and 4(1) fourth para. — The Committee
feels that the reference to points 5 and 7 of the Annex may be
too limiting, and should instead be phrased in more general
terms, referring to ‘all financial services in which, by their
nature, it is not materially possible to exercise the rights of
reflection or withdrawal, such as those mentioned in points 5
and 7 of the Annex.’

3.7.
Article 7 — The Committee feels, in line with an earlier
opinion (2) that where the ‘durable medium’does not offer
sufficient guarantee of reliability or security, Member States
should be given the option to require communication in
writing in the cases referred to in the directive (3).

Alternatively, and if it proves impossible to produce
3.7.1.
an unambiguous and exhaustive definition of
‘durable
medium’, the Committee recommends making it obligatory,
within a reasonable period of time (8 days), to confirm in
writing the communication sent via a ‘durable medium’ as
long as receipt of this has not been acknowledged, even though
the import of the communication would take effect as soon as
it was received via a ‘durable medium’, unless the consumer
could prove that he had never received it. In the latter case, the
import of the communication would only take effect once
written confirmation was received.

3.5.1.

(Does not apply to English version).

3.8.

(Does not apply to English version)

(1) Although the Explanatory Memorandum speaks of ‘harmon-
ization’, Article 1 uses the term ‘approximate’. The two concepts
do in fact differ, as can be seen in Filiali Osman, ‘Codification,
Unification, Harmonisation du Droit en Europe’ and Antoine Jeam-
maud, ‘Unification, Uniformisation, Harmonisation: de quoi s’agit-il?’
in ‘Vers un Code Européen de la Consommation’, p. 11 and 35
(Bruylant, 1998).

3.8.1.

(Does not apply to English version)

(2) Cf. Opinion OJ C 40, 15.2.1999 on electronic signatures.
(3) Note that the various language versions differ here.

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3.9.
Article 10 — The Committee feels there is no justifi-
cation for allowing each Member State to decide between the
options given in Article 10(2).

It feels that there should be a clear and unequivocal imposition
of the system referred to in indent (a), i.e. unsolicited communi-
cations shall not be authorized if the consent of the consumers
in question has not been given.

3.10.
Article 11(2) — The section about penalties in the
event of failure to comply with Articles 6 and 10 should form
a separate Article.

3.11.
Article 11(3) — The term ‘close link’ should be clearly
defined in Article 2 with the same sense as the term ‘closer
connection’ used in the Rome Convention. As a separate issue,
consideration should be given to the desirability of using the
same terminology, especially as a different term is used in
other texts, notably Article 6 of Directive 93/13/EEC of 5 April
1993 on unfair terms in consumer contracts.

3.12.
Article 12 — The Committee feels that the Com-
mission — without prejudice to the provisions of the Brussels
and Lugano Conventions — should consider the possibility of
including a provision on the competence of the courts which,
in the case of a cross-border dispute, would allow the consumer
to choose between taking legal action in the national courts of
the country in which he resides or in the national courts of
the country in which the supplier is domiciled or has its
headquarters, while any legal action against the consumer
should always be undertaken through the courts of the country
where the consumer is resident.

Lastly, the Committee feels that the directive should
3.13.
provide for periodic assessment of implementation, as is the
case with a number of Community directives (1).

(1) An example is Directive 89/552/EEC, 3.10.89, Article 26: ‘Not
later than the end of the fifth year after the date of adoption of this
Directive and every two years thereafter, the Commission shall submit to
the European Parliament, the Council and the Economic and Social
Committee a report on the application of this Directive and, if necessary,
make further proposals to adapt it to developments in the field of
television broadcasting.’

Brussels, 29 April 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

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APPENDIX

to the ESC Opinion

The following points from the section opinion were amended by the Plenary Assembly, but received at least a quarter
of the votes cast.

Point 2.2

‘The Committee calls on suppliers of financial services to implement the provisions of the directive voluntarily as
soon as possible, in advance of the deadline of 30 June 2002.’

Result of vote

For: 74, against: 43, abstentions: 8.

Point 2.8

‘Bearing in mind the need to provide detailed advance information and a reflection period, as well as the expensive
refinancing conditions for suppliers, the Committee is of the opinion that the suggested periods laid down for
exercising the right of withdrawal appear to be sufficient and should be implemented in all Member States.’

Result of vote

For: 75, against: 48, abstentions: 5.

Point 2.11

‘The Single Market requires that service suppliers should be able to operate throughout the EU on the basis of their
home country of origin rules rather than face 15 different sets of national rules which would fragment the market,
raise costs and prices and inhibit consumer choice.’

Result of the vote

For: 71, against: 59, abstentions: 2.