ILAG by hilen


									    ILAG                                           Investment & Life Assurance Group
                                                         The Practitioner Voice

European Commission
Directorate-General Health & Consumer Protection
Rue de la Loi 200
1049 Brussels

15 May 2007

Dear Sirs/Mesdames

EC Green Paper on the Review of the Consumer Acquis

I have pleasure in responding on behalf of ILAG to the above Green Paper.

ILAG is a professional representative body in the UK concerned with the future of the
investment, life assurance and pensions industry. It is led by practitioners and aims
to identify and develop industry good practice. The Group currently has a growing
membership of around 50 practitioner companies and associate members. In
addition, a number of individual members are affiliated to the Group.

Having studied the paper, we appreciate that it does not apply directly to consumer
contracts/ protection within the financial services sector and that the Commission has
specifically recognised that ‘it may be necessary to exclude the application of all or
part of any legislative follow-up to the financial sector’. We believe that the
significance of this statement cannot be over-stressed. Firstly, well-established EC
legal requirements already exist providing detailed rules and procedures affecting the
rights of consumers in purchasing financial service products. These are particularly
relevant to the insurance and investment sectors and are soon to be consolidated
within the investment sector under MiFID. Such obligations are now firmly integrated
within firms’ systems and controls and are becoming embedded within the whole
business culture of the financial services sector in the UK - see Financial Services
Authority website on ‘Treating Customers Fairly’:
FSA announces progress made on TCF and sets further deadline – 8 May 2007.

These rules also extend to the resolution of contract conflicts under which, as
recognised in the Green Paper, ‘applicable law’ in the insurance field is usually that
of the consumer’s or policyholder’s place of habitual residence. We are aware that
these specific rules are under scrutiny at present within the Rome I review exercise
but nonetheless do not expect to see this practice fundamentally changed or
challenged in the future. As such, national law will continue to exert a critical role in
determining consumer rights and protection alongside EU provisions.

A second and allied factor to be borne in mind is that at case level judgements will be
influenced by application and determination of ‘local’ conditions having regard to
individual circumstances which cannot possibly be wholly addressed within EU law.

    ILAG                                          Investment & Life Assurance Group
                                                        The Practitioner Voice

This applies as much to courts of law as to alternative dispute resolution mechanisms
eg, Financial Ombudsman Service. In this context, any attempt to harmonise
conditions within the EU is fraught with problems – even if aimed at a very low or
basic level – subject as it will be to varying interpretations according to the languages
and customs of different member states.

Although cross-border business may be encouraged by attempts at EU
harmonisation to overcome consumer reluctance and concerns we do not believe
that a horizontal approach aimed at harmonizing requirements across various
regulations is likely to be a productive short-term solution. Instead we would prefer
that as far as possible the status quo be maintained. However, if the consensus
favours proceeding further then such action should be along vertical lines as any
attempt at a horizontal or ‘mixed’ approach would be a recipe for confusion for all
contractual parties. Whilst continuing fragmentation may not represent an ideal
situation it is a necessary reflection of the size, spread and diversity of the EU.

Given our general remarks and the extent of our members’ interests, we have taken
the opportunity on the attached sheet of answering those questions in Annex 1 of the
Green Paper as if they were relevant to the financial services sector – particularly as
a few of the affected directives set out in Annex II eg. Unfair Terms in Consumer
Contracts could in theory extend to financial services legislation. However by way of
a final, over-arching comment we endorse and reiterate the importance of financial
services being excluded from the present exercise.

We hope that our general views and responses to questions are useful to you.

Yours faithfully

Doug Thow
Technical Analyst

    ILAG                                          Investment & Life Assurance Group
                                                        The Practitioner Voice

                     ILAG Responses to Questions in Annex 1

Question A1. In your opinion, which is the best approach to the review of the
consumer legislation?

Answer A1. Either status quo: no revision or a vertical approach consisting of the
revision of the individual directives where necessary.

QA2/3.       What should be the scope of a possible horizontal instrument?
What should be the level of harmonisation of the revised directives/ the new

AA2/3.         No comment.

QB1.           How should the notions of consumer and professional be defined?

AB1.          Option 1: Consumers would be defined as natural persons acting for
purposes which are outside their trade, business or professions. Professionals would
be defined as persons (legal or natural) acting for purposes relating to their trade,
business and profession.

QB2.          Should contracts between private persons be considered as consumer
contracts when one of the parties acts through a professional intermediary?

AB2.           No comment.

QC.            Should a horizontal instrument include an overarching duty for
professionals to act in accordance with the principles of good faith and fair dealing?

AC.            The status quo would be maintained: there would be no general

QD1.           To what extent should the discipline of unfair contract terms also cover
individually negotiated terms?

AD1.          Status quo – Community rules would continue to apply exclusively to
non-negotiated or pre-formulated terms.

QD2.           What should be the status of any list of unfair contract terms to be
included in a horizontal instrument?

AD2.           Option 1: Status quo – to maintain the current indicative list.

    ILAG                                          Investment & Life Assurance Group
                                                        The Practitioner Voice

QD3.         Should the scope of the unfairness test of the directive on unfair terms
be extended?

AD3.          Option 2: Status quo – the test of unfairness would be kept in its
present form.

QE.            What contractual effects should be given to the failure to comply with
information requirements in the consumer acquis?

AE.           Option 3: Status quo – the contractual effects of failure to provide
information would continue to be regulated differently for different types of contract.

QF1.        Should the length of the cooling-off periods be harmonised across the
consumer acquis?

AF1.         Option 3: Status quo – cooling-off periods would not be harmonised in
the consumer acquis; they would be regulated in sectoral legislation.

QF2.           How should the right of withdrawal be exercised?

AF2.           Option 1: Status quo - Member States would be free to determine the
form of notice of withdrawal.

QF3.           Which costs should be imposed on consumers in the event of

AF3.           Option 3: Status quo – the current regulatory options would be

QG1.          Should the horizontal instrument provide for general contractual
remedies available to consumers?

AG1.            Option 1: Status quo – the existing law provides for remedies limited
to the particular types of contracts (ie. sales). The general contractual remedies
would be regulated by national law.

QG2.         Should the horizontal instrument grant consumers a general right to
damages for breach of contract?

AG2.          Option1: Status quo – the issue of contractual damages would be
governed by national laws, except when provided for in the Community acquis (eg.
package travel).

QH1 - QN.      No further comments.



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