Banks angry at distance selling plan

Date: 26/10/1995

By Fiona McHugh

DRAFT EU rules on distance selling look set to run into fresh controversy amid calls from key MEPs for financial services to be included within their scope.

A hard-won exemption from the proposed directive granted to banks and insurance companies by EU consumer ministers last year may be removed if the European Parliament decides to support the changes suggested by some of its members.

The move has been welcomed by consumer groups but angered banks, who say they would lose valuable business if forced to comply with the proposed amendments.

“It is hard to believe that the Parliament would even consider opening up this debate again given the difficulty it caused in both the Council and the Parliament first time around,” said one banking representative.

“We are already burdened with plenty of legislative measures protecting consumers. There is no need for this. It will be extremely detrimental.”

Of particular concern to banks is the provision within the directive which allows for a seven-day cooling-off period during which customers can change their minds about contracts they have signed.

“These changes would allow customers to buy investment bonds, for instance, and then if those bonds depreciate in value during the week, return them. It will create havoc on the market,” said Gaël du Bouetiez of the World Savings Bank Institute.

But consumer groups disagree, arguing the directive should cover all products sold from a distance.

“More and more financial services are sold over the phone or by fax. We don't see why they should be treated differently from other products. Our belief is that consumers should be protected whether they are buying a financial service or a material product,” says Caroline Kerstiëns of the European consumer group BEUC.

The Parliament is also considering imposing a ban on 'cold calling' which it says invades the privacy of consumers. An amendment submitted by German Socialist Annemarie Kuhn would, if adopted, force sellers to get prior consent from consumers before phoning them.

The European Federation of Direct Marketing (FED!M) says this would sound the death knell of the telesales business and cause up to 500,000 job losses.

“Telephone sales is a big business. It employs hundreds of thousands of people, directly or indirectly, in the EU, many of whom could lose their jobs if this measure is adopted,” said Alistair Tempest.

Telecoms operators will also feel the effects of such a provision. A large chunk of their voice telephony revenue is generated by telephone sales, according to FED!M. Both are pushing the EU to introduce an opt-out system which would allow customers to put their names on a 'do-not-disturb' list which would then be distributed to all the relevant companies.

But all these changes would almost certainly be fiercely resisted by consumer ministers. The Parliament's consumer committee is due to discuss the proposed amendments next week.