DIRECT MARKETINGCODE OF PRACTICE
Unsolicited telephone calls promoting general insurance
6 Members are reminded that when making unsolicited calls promoting general insurance that they must at all times treat the customer fairly by disclosing full details of the product and not making significant omissions that could mislead the customer into buying an unsuitable product
Markets in Financial Instruments Directive (MiFID) – suitability test
7 Members’ attention is drawn to the obligation under MiFID that sufficient information regarding the customer’s knowledge and experience, financial situation and investment objectives must be obtained by accompany to enable it to recommend investment services and financial instruments suited to the client. Members should refer to the Conduct of Business Sourcebook (COBS) 9 Suitability (including basic advice) in the FSA Handbook.
MiFID –
appropriateness test 8 Members must take note of the appropriateness provisions of MiFID. See COBS 10 Appropriateness (for non-advised services) in the FSA’s Handbook. Particular care should be taken with regards to the contents of mailings promoting products covered by MiFID. See particularly COBS 10.5: Assessing Appropriateness: Guidance that contains guidance on personalised mailings.
Recording of telephone and electronic
communications
9 Members engaged in transactions in the equity, bond and derivatives markets must record all telephone conversations and electronic communications relating to client order and the conclusions of transactions regarding these products. Members should note COBS 11.8 on Telephone Recording in the FSA Handbook.
Information to be
included 10 In good time before being bound by any distance contract or offer for financial services, the consumer must be provided with the following information in a clear and comprehensible manner:
Description a) a description of the main characteristics of the financial product being offered
Price b) the total price, including all related fees, charges and expenses and all taxes paid via the supplier or where the exact price cannot be indicated, the basis for the calculation of the price
Limitations c) any limitations, penalties and the terms of withdrawal Rates of interest etc d) the basis used to calculate any rates of interest, forecasts or
projections
Warning notices – risks e) warning notices regarding the existence of special risks associated with features of the product and an indication that the value of the product may vary and, unless guaranteed, can go down as well as up
Guarantees f) where the value of the product is guaranteed, details of the guarantee offered
Warning notices – past
and future performance g) warning notices that past performance or experience does not necessarily give a guide for the future (any examples used must not be unrepresentative)
Taxes/extra costs h) where applicable, an indication that other taxes and/or costs may exist that are not imposed by or paid via the supplier
Validity of offer i) any limitation of the period for which the information is valid Payment and
performance j) arrangements for payment and performance
Cost of communicating k) any specific additional cost for the consumer of using the means of distance communication to accept the offer in question
Details of the supplier l) full details of the supplier, and any relevant representative, including:
i) their identity and main business
ii| the geographical address at which the supplier, and any relevant representative, is established and any other relevant address
iii) any registration number or equivalent relating to any trade or similar public register in which the supplier is entered and, where relevant, full details of any representative of the supplier in the consumer's country of residence and
iv) details of any professional involved in the sale of the product including identity, geographical address and the capacity in which that person is acting
Details of the contract m) details of the contract including:
Right of withdrawal i) the existence or absence, except in certain specified circumstances, of a right of withdrawal and where the right of withdrawal exists, its duration (as required by law) and the conditions relating to the right. Information must also be provided on the amount that a consumer may be required to pay where withdrawal from a service takes place after commencement. Information must also be provided, inter alia, on the address to which the withdrawal notice should be sent Duration of the contract ii) the minimum duration of the contract in the case of financial
services to be performed permanently or recurrently Early termination of the
contract iii) information on any conditions or penalties applying to early termination of the contract Applicable law iv) an indication of which country's law will apply within the EEA
(the Member States of the European Union together with Iceland, Liechtenstein, and Norway) to the particular distance contract and any contractual clause on law applicable to the distance contract and/or competent court
Language to be used v) the language in which the contractual terms and conditions and prior information as detailed are to be supplied and the language used, with the consumer's agreement, to communicate for the duration of the contract
DIRECT MARKETINGCODE OF PRACTICE
Redress vi) any information on redress mechanisms and methods of access to them
Guarantee funds/
compensation vii) the existence of any guarantee funds or compensation arrangements.
What is a vulnerable
consumer? Many people believe that vulnerable consumers cover people such as children and young persons, or those having physical disabilities. Whilst these two sectors do indeed fall under the category, it is important to recognise that the interpretation does include other sectors.
The definition as found in the Collins English Dictionary is: ‘Liable to be physically or emotionally hurt; exposed to attack’ A more defined list might be:
a) Children and young persons - those under 18 and in some cases 16 or 14 as defined further under paras 2.17, 8.13 - 8.25, 19.22 - 19.31 and 20.22 - 20.26.
b) Physical Disabilities - those having sight, hearing, or mobility impairment or difficulties
c) Mental Disabilities
d) Literacy or Numeracy difficulties - those who are educationally disadvantaged, or for whom English is not their first language. e) Other Groups
i) Permanent or temporary non-British citizens ii) The elderly
iii) Unemployed
iv) Recently bereaved including stillbirths and neonatal
What does the DMA Code of Practice say about vulnerable consumers?
In addition to the section above regarding children and young persons, the Code also has the following statement at para 3.26:
When members become aware that they are dealing with vulnerable consumers, they must take all reasonable steps to allow for any difficulties the consumer may have, for instance explaining the terms of an offer or the consequences of responding in a clear and helpful manner and giving appropriate advice. Members must not exploit the credulity, lack of knowledge or inexperience of any consumer, taking particular care when dealing with vulnerable consumers. Members should refer to the relevant legislation and codes of practice on this subject for further guidance.
This states the member’s obligation towards vulnerable consumers, in addition advice can also be sought from the DMA legal team (0207 291 3300) or by contacting such organisations as:
The Office of Fair Trading www.oft.gov.uk The RNIB www.rnib.org.uk
The RNID www.rnid.org.uk
Age Concern www.ageconcern.org.uk NSPCC www.nspcc.org.uk
The Equality and Human Rights Commission www.equalitydisabilityrights.com