Distance contracts for financial services
Distance contracts for financial services are contracts between a consumer (for these purposes only a natural person) and a supplier which are concluded solely using means of distance communication (e.g. telephone, fax, e-mail or the internet), enabling a contract to be concluded without the concurrent physical presence of the parties, and which concern banking, payment, credit or insurance services, contracts relating to pension schemes, contracts relating to the provision of investment services or contracts relating to trades on a market in investment instruments. Rules regarding distance contracts for financial services are laid down in Articles 1841 to 1851 of Act No. 89/2012 Coll., the Civil Code.
Rules for the use of means of distance communication
Means of distance communication enabling individual negotiations may only be used in the following cases:
- where the provider informs the consumer well in advance prior to the conclusion of the contract about the costs associated with the use of the means of distance communication where they differ from the basic rate;
- where the provider provides the consumer with the wording of the contract and the general terms and conditions in text form before the contract becomes binding on the consumer; if the contract is concluded at the consumer’s request with the use of means of distance communication which do not enable that, the entrepreneur must comply with this duty immediately after the conclusion of the contract;
- where the provider does not deny the customer the right to receive at his request the contract and the general terms and conditions in printed form at any time during the period of the distance contract for financial services or the right to repeatedly change the means of distance communication (e.g. from written to e-mail), unless stipulated otherwise in the contract or unless ruled out by the nature of the services provided.
An order must be confirmed immediately upon receipt; this does not apply to the conclusion of a contract exclusively by exchanging e-mails or similar individual communication.
Information duties of the supplier (financial service provider)
The financial institution as the service provider must inform the consumer of the following facts in text form (not using only a reference to a website) well before the conclusion of the contract or before the consumer makes a binding offer:
- the identification data of the financial service provider, or the telephone number or address for electronic mail delivery, or other contact information,
- the name of the financial service offered and a description of its main characteristics,
- the method of payment and the manner of performance on the part of the provider,
- the cost of the means of distance communication where different from the basic rate,
- where the contract is for repeated performance, the shortest time for which the contract will be binding on the parties,
- the main object of its business,
- the name and address of the authority responsible for supervision or state inspection of business activity in the case of a business pursued on the basis of an authorisation,
- the total price of the service provided, including any fees, taxes paid through the entrepreneur and other related costs; where the exact total price cannot be determined in advance, all data on the method of calculation of the final price – enabling the consumer to verify this price – must be provided,
- information about any additional taxes or costs not paid through the entrepreneur or not collected by the entrepreneur,
- potential risks beyond the entrepreneur’s control associated with the financial service provided, including a warning that past returns are no guarantee of future returns,
- practical instructions for exercising the right to withdraw from the contract, including the address to which notification of withdrawal from the contract should be sent,
- information about the right of each party to terminate prematurely or unilaterally its obligation arising under the contract on the basis of the contract conditions, including information on any sanctions,
- information about the member state(s) of the European Union whose legal rules the entrepreneur accepts as the basis for establishing relations with the consumer before concluding the contract,
- information about the contractual clause on the applicable law and court jurisdiction in the event of a dispute under the contract,
- information about the language(s) in which the entrepreneur will deal with the consumer for the duration of the obligation and in which he will provide contractual conditions and other information to the consumer,
- information about the existence, manner and conditions of out-of-court settlement of consumers’ complaints, including information on whether a complaint may be filed with a supervisory or state inspection authority,
- information on the existence of a guarantee fund.
(hereinafter “pre-contractual information”)
If the financial service provider contacts the consumer by telephone, he must provide him at the start of the conversation with basic information about himself and the business purpose of the conversation initiated by the provider.
If the contract was concluded at the consumer’s request using means of distance communication that do not allow the provision of information about pre-contractual conditions and other aforementioned information (pre-contractual information), the financial service provider must provide this information immediately following the conclusion of the contract. Conclusion of the contract, for example by telephone, will not take place unless the content of the obligation is agreed in an unambiguous manner during the conversation to an extent corresponding to the essential elements of the contract and the consumer unambiguously expresses his will to be bound by the agreed obligations.
The contract on the provision of financial services concluded thereafter must accord with the information provided to the consumer prior to the conclusion of the contract. If the content of the contract is nevertheless to differ from this information, the consumer must be informed about this before the contract is concluded and the changes must be expressly indicated in the contract. Otherwise, the variant that is more favourable to the consumer applies as the content of the contract.
The consumer’s right to withdraw from the contract
If a contract on financial services has been concluded using means of distance communication, the consumer is entitled to withdraw from the contract. Such a withdrawal cancels the contract from the very beginning, resulting in a situation as if the contract never existed at all.
The consumer is entitled to withdraw from the contract within 14 days of its conclusion.
If the pre-contractual information required by law was provided to the consumer after the conclusion of the contract, the consumer is entitled to withdraw from the contract within 14 days of the day when this information was provided. The consumer is entitled to withdraw from a life insurance or private pension scheme contract within 30 days of the day when he was informed by the entrepreneur of the conclusion of the distance contract.
It is not possible to withdraw from a concluded contract if
- the price of the financial services which are the subject of the contract depends on price movements on financial markets that cannot be influenced by the entrepreneur, such as services relating to foreign exchange and investment instruments,
- the contract is for travel insurance, luggage insurance or similar short-term insurance with an insurance duration of less than one month.
The consequences of the consumer’s withdrawal from the contract:
- the financial service provider may require the consumer to pay without undue delay the price only for services actually provided before the withdrawal; the price must not be disproportionate to the extent of the service provided. However, the entrepreneur is not entitled to payment of the price if he started performing without consent from the consumer before the time limit for withdrawal elapsed, or if he fails to prove that he informed the consumer about his right to require payment of the price or a proportionate part thereof if the consumer withdraws from the contract;
- the financial services provider must return to the consumer any funds accepted on the basis of the contract without undue delay, but no later than 30 days after the withdrawal. The consumer must also return to the entrepreneur any funds or other assets accepted on the basis of the contract within 30 days of the day when he sent the notification of withdrawal.