The concept of remote financial services includes all services related to banks, credits, investments and payments for which the contracts are entered into by telephone, internet, email or fax, for example.
This excludes services related to insurance and individual retirement services in the form of insurance contracts. The rules governing the distance sales of insurance contracts with consumers are set out in the Law of 27 July 1997 on the insurance contract, as amended.
All of these distance contracts related to financial services must comply with the same rules.
These services are also subject to other rules pertaining to the nature of the services offered – for example when the financial service is consumer credit.
How to proceed
Definition of a distance contract
A distance contract is:
- a contract for the provision of services between a professional and a consumer;
- entered into as part of a distance system organised by the professional;
- in which the professional and the consumer are not in the same place at the same time during the 3 phases of a contract:
- the offer;
- the negotiation;
- the conclusion of the contract.
- in which the only methods of communication used are distance methods.
Examples of distance communication methods:
- standard post;
Examples of distance contracts for financial services:
- opening a bank account via the internet;
- investment in units of an investment fund via the internet;
- acquisition of a credit card;
- concluding a credit agreement by exchange of emails.
Thus, a distance contract may also be a situation in which the consumer goes to a bank simply to collect general information on goods or services (for example, on bond purchases), and then goes home and concludes the contract remotely – by telephone, for example.
On the other hand, the following situations are not distance contracts:
- a consumer negotiates a credit agreement in a bank branch, then goes home and concludes the contract by telephone, after which the bank sends the loan contract for signature by the consumer;
- the credit agreement is prepared via an exchange of emails, but is finally signed in the bank's offices.
Prior agreement by the consumer
The professional must first obtain the consumer's prior agreement before they can contact them by:
- automated telephone service, without human involvement;
The professional must demonstrate that the consumer has agreed to be contacted by one of these means.
Concerning other means of distance communication (e.g. by post), the professional may contact the consumer only if the consumer has not manifestly opted out.
Right to information and contract on paper
Prior to the conclusion of any contract, the professional must provide a certain amount of information to the consumer.
At any time, until the end of a contract, the consumer has the right to ask the professional to receive the terms and conditions of the contract on paper.
In theory, a consumer also has the right to change the distance communication method used.
Following the conclusion of a contract, a consumer may withdraw, without providing any reasons and without additional cost, within 14 calendar days, starting:
- from the day of conclusion of a contract (if it is for the provision of services such as opening of a bank account); or
- from the day of acceptance of the goods (if the contract pertains to delivery of goods).
If the last day of the time period is not a working day, the time is extended until the next working day. A working day is any weekday except for Sundays and public holidays.
The effect of withdrawal is that the distance contract is automatically cancelled. The contract is then deemed never to have existed.
The consumer cannot waive their right of withdrawal even if they have signed a clause to that effect in the contract or the general terms and conditions. Such a clause is considered null and void.
How to withdraw from a contract
Within 14 days, the consumer must inform the professional in writing on paper or any other durable medium that they wish to withdraw from the distance contract. The withdrawal notice must be sent before the end of the time period.
Moreover, the professional may also give the consumer the option of completing and sending a withdrawal form or any other unambiguous declaration online using the professional's website. In this case, the professional must then immediately acknowledge receipt of the consumer's withdrawal notice by way of a receipt on a durable medium (e.g. paper).
The consumer must comply, in all the details, with the precise instructions that the professional provided to them prior to the conclusion of the contract.
Important: If a consumer does not receive the information prior to the conclusion of a contract and the concrete elements of the contract prior to delivery of the goods or conclusion of a contract for financial services, the 14-day period only begins to run on the day of receipt of the information or concrete elements of the contract.
Exception for individual retirement services not in the form of insurance
If a consumer signs a contract for a supplementary pension (at a distance), then they may withdraw from it within 30 calendar days. The short time – as for other distance contracts – starting from conclusion of the contract for provision of financial services (or from the delivery of the goods), or starting from the day when the professional provides the necessary information and the concrete elements of the contract.
Exception for consumer credit agreements
If a consumer concludes a consumer credit agreement (at a distance), special rules apply for the right of withdrawal.
Exception for credits made to finance goods or services ordered remotely
If the goods or service were financed by credit offered to the consumer by the professional, the consumer does not need to expressly withdraw from the credit. The credit is automatically terminated if the consumer withdraws from the contract for the financial service ordered remotely. Credit is also terminated when it has been given to a third party, but following an agreement made between that third party and the professional.
If a consumer has concluded a distance contract for financial services and if, in addition, they concluded another distance contract for financial services linked to the main contract, when the consumer withdraws from the main contract, the other contract is automatically cancelled.
Proof of withdrawal
The consumer must prove that they have withdrawn from the contract within 14 calendar days of the conclusion of the contract. It is advisable to send one's withdrawal by registered mail with acknowledgement of receipt and to keep a written copy.
Cases in which withdrawal is not possible
There are cases in which the consumer does not have the right to withdraw from the contract:
Financial services whose price depends on fluctuations of the financial market that can exist during the retraction time – for example, services relating to the following types of transaction:
- foreign exchange transactions; Example: conversion from EUR to USD
- money market instruments; Example: treasury bonds or certificates of deposit;
- negotiable securities; Example: company shares; bonds;
- units in investment funds;
- forward rate agreements (futures), including similar instruments that will be paid in cash;
- forward rate agreements (FRA);
- exchange contracts on interest rates (swaps) or foreign currencies or exchange contracts on amounts related to shares or indices on shares (equity swaps);
- options to buy or sell one of the instruments mentioned above, including similar instruments paid in cash, and including options on currencies and interest rates;
- if the consumer expressly requests the contract to be executed prior to the end of the withdrawal deadline, they lose the right of withdrawal;
- credit to finance a building or land;
- property mortgage credit;
- declarations made by a consumer to a public officer, on condition that the consumer has received all information and conditions to which they are entitled, and that the public officer has certified receipt of that information.
A professional may only demand payment for services that they have actually provided to the consumer. Payments must be proportional to the value of the service actually provided with respect to all the services determined in the contract.
A professional may provide the goods or services ordered only after the consumer has given their approval.
A professional cannot impose a penalty on the consumer:
- if, prior to the conclusion of the contract, the professional does not inform the consumer of the amounts that they must pay if they withdraw from the contract; or
- if they have delivered goods or services without waiting for the end of the withdrawal period (unless at the express request of the consumer: in this case, the professional can claim payment from them).
The consumer must reimburse the professional for any amount received from the professional. They must repay the money and/or return the proceeds within 30 days from the day when they sent the withdrawal notice. If they do not reimburse the professional in this time period, they must pay interest to said professional at the legal rate starting on the day after the end of the 30-day time period.
Reimbursement of the consumer
In case of withdrawal, the professional must reimburse the consumer for all amounts that they have paid to said professional, including the delivery costs, if applicable. The only expenses that may be charged to the consumer due to the exercise of their right to withdraw are direct costs for the return of the goods, and the costs corresponding to the service already provided to the consumer.
They must do so within 30 days of the day when they received the withdrawal notice. If they do not reimburse the consumer during this time period, they must pay the consumer accrued interest at the legal rate starting from the end of the 30-day period.
Provision of unrequested financial services
If a professional provides financial services that the consumer has not asked for, the consumer is not required to pay for the service. The professional cannot claim any compensation whatsoever from the consumer, on pain of criminal fines or administrative sanctions.
If the consumer does not react upon receiving the services, it does not mean that they agree with the provision of the service. Clauses of the type 'unless you indicate otherwise, we consider that you agree with our proposal' are invalid.
It is up to the professional to prove that the consumer has ordered the delivery of a good or the provision of a service.
These rules must not be confused with the case in which a contract is subject to automatic renewal if the consumer does not terminate it at its end. In this case, the contract continues to run and the consumer is not exempted from paying the professional.
The professional cannot claim any compensation whatsoever from the consumer, nor the return, nor the keeping of the goods, on pain of fines.
Who can consumers turn to if there is a problem? What are the consequences?
In case of an individual problem related to a distance contract for a financial service, a consumer may ask the court to cancel or terminate the contract, or in certain cases, request damages and interest if they can prove that they have been harmed.
The consumer may, in this situation, also contact various bodies, including the following:
- Luxembourgish Consumer Protection Association (Union Luxembourgeoise des Consommateurs Nouvelle – ULC – a not-for-profit): The ULC will inform, advise and defend consumers in the case of a problem for a Luxembourg national; The ULC also defends the collective interests of consumers and may ask the court to issue an injunction on certain actions of the professional.
- European Consumer Centre Luxembourg (Centre Européen des Consommateurs EIG Luxembourg – CEC): The CEC Luxembourg informs consumers and defends their interests if the consumer has a problem with a professional located in another EU country;
- Luxembourg Financial Sector Supervisory Commission (Commission de Surveillance du Secteur Financier – CSSF): A consumer may contact the CSSF if they believe that the rules described in this article have not been complied with. The CSSF has authority only if a claim concerns a bank or other financial sector business. The CSSF may then try to find an amicable solution to the claim.
If the collective interests of consumers are at stake, the professional that does not follow the rules on distance contracts for financial services (except for insurance) may be subject to a court order to cease their actions. The court may order any necessary steps to stop an action that is against the law. If the professional does not comply with a court order, they may incur a fine of up to EUR 50,000.
This injunction may be launched at the request of:
- an approved consumer protection organisation; or
- the CSSF.
In practice, a consumer facing a problem with a professional may go to a consumer protection organisation or the CSSF, which will then assess the possibility and the opportunity of undertaking a summary procedure against the professional, first determining whether the collective interests of consumers are at stake.
Special case of e-commerce
In addition to the above, a professional risks a prison sentence and a fine of up to EUR 125,000 if they send commercial messages by email without the consumer's prior approval.