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The Distance Marketing of Financial Services to Consumers Law of 2004 (N.242 (I) 2004)

The Distance Marketing of Financial Services to Consumers Law of 2004 (N.242 (I) 2004)

The Consumer Right of Withdrawal

The Distance Marketing of Financial Services to Consumers Law (N.242 (I)2004) aims to regulate the functioning of the internal market with respect to distance marketing of financial services to consumers. The law applies to all financial services providers (banking services, insurance, and investments), including pension funds, which use distance marketing / solicitation (via phone, fax or internet) i.e. not involving the simultaneous presence of the provider and consumer, to provide their services.

One of the main provisions of the law is the obligation of the financial services provider to provide consumers with all information required to properly appraise the financial services offered to them and hence make a well-informed choice.

Consumer information relating to a distance contract must be provided in good time before the consumer is bound by an offer or an initial service agreement and must include:

  • Information on the existence or absence of the consumer’s right of withdrawal

  • Where the right of withdrawal exists, its duration and the conditions for exercising it, as well as the consequences for not exercising that right.

  • Clear instructions must be given to consumers for exercising the right of withdrawal. These instructions must be provided through the same means of distance marketing / solicitation as the initial service agreement.

  • A template of a withdrawal notification must be provided. The template should include the address to which the withdrawal notification will be sent.

  • Where the right of withdrawal exists, specific information is needed on any amount the consumer may be required to pay. According to the provisions of article 14(4) of the law, the financial services provider may not require any payment by the consumer unless the provider can prove the consumer was properly informed in advance about the obligation of such payment.

  • The financial services provider should clarify whether the consumer needs or does not need to provide the reasons for the withdrawal.

The consumer’s right for withdrawal does not apply to financial services the price of which is determined freely by the laws of supply and demand in the capital markets, as well as services related to:

  • Forex and CFDs

  • Securities

  • Exchange traded securities

  • Investment fund units

  • Forward contracts

  • Swaps

  • Interest rate swaps

  • Option contracts, including outright purchase or sale of the underlying asset for which the clearing is done in cash.

All financial services providers should determine if the services they provide are free or not from the obligation of consumer right of withdrawal and inform the consumers accordingly.

Where a provider is exempt from the Consumer Right of Withdrawal, any required payments must be specified in detail. There are 3 instances in which payments may be required:

  • The consumer has completed the registration process, but has not made any deposits in his/her account.

  • The consumer has completed the registration process and has made a deposit in his/her account but has not made a transaction or a placement of order.

  • The consumer has completed the registration process, has deposited an amount in his/her account and has made a transaction /placement of order.

To comply with the Law, all financial services providers are required to modify their consumer pre-contractual information according to the above instructions within 30 days of receiving this notice.

The Consumer Protection Service will perform random spot-checks and will impose the penalties applicable under article 19 (2) of the law in the case of non-compliance with the provisions of the law. The Consumer Protection Service can impose fines up to 170,860 Euros.


Here at FAI Comply we can help you implement the correct compliance procedures and protocols suitable for your business to avoid a large fine.


Written by Constantinos Constantinides, Director of FAI Comply


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