16 April 2002

Distance Marketing Directive enters Second Reading

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The EP Committee on Legal Affairs voted on the draft Recommendation of the rapporteur Ms Berger on the Council Common Position of the distance Marketing Directive. Although the rapporteur recommended adopting the Common Position with respect to the narrow majority situation on the issues concerned within the European Parliament itself and the fragile compromise in the Council, some 143 amendments were made. Most of the amendments were dismissed in Committee vote.

The Committee adopted 38 amendments falling into two main categories, the first enhancing consumer protection and the second taking greater account of financial service providers' interests.

The first group of amendments broadens the scope of the directive by widening the definitions of terms such as 'supplier' (to include 'intermediaries') and including 'all forms of credit' so as to cover more cases and thus ensure better protection for consumers. Two related amendments aim to clarify the time period within which consumers can withdraw from a contract without incurring penalties and without giving reasons. This period will be 14 calendar days in principle or in some cases 30 days or, following an amendment adopted by the committee, under certain circumstances 3 months.

The second group of amendments seeks to ensure better protection for the other parties to such contracts, e.g. financial service providers and in particular credit and insurance providers. The aim is to strike a balance between the interests of consumers and sellers. Among these amendments is one completely removing the consumer's right to withdraw from certain contracts for home loans or home improvements (e.g. mortgages). The Council's common position left it up to Member States to decide whether or not to remove this right. This change is designed not only to create a more harmonised internal market but will also benefit consumers as it should prevent the development of national variations in cost structures in the credit industry. Two further amendments would allow insurers to go ahead with tacit renewals in cases where a customer has previously given written consent.

The original proposal was a compromise which 14 of 15 Member States signed after two years of discussion. The recommendation will be voted in Plenary during its May session.

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