In particular there are rules and guidance relating to communications with banking customers and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers (BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6).
COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13.1 (Preparing product information) and COBS 14.2 (Providing product information to clients) apply to accepting deposits as set out in those sections.
Financial promotions can be real time or non-real time. A real time financial promotion is communicated in the course of a personal visit, telephone conversation or interactive dialogue. A non-real time financial promotion is not a real time financial promotion. It includes a financial promotion made by letter, e-mail or contained in a newspaper, journal, magazine, other periodical publication, website, television or radio programme or teletext service.
COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply to a firm with respect to the activity of accepting deposits as set out in those provisions, COBS 4.1 and BCOBS.
In addition to the limited application ofthe financial promotion rules2, a number of exemptions within the defined term excluded communication are relevant. In particular, paragraphs (a) and (e) of the definition provide further limitations on the application of the financial promotion rules in relation to credit unions2:2 2
Exemption (a2): A financial promotion that would benefit from an exemption in the Financial Promotion Order if it were communicated by an unauthorised person, or which originates outside the United Kingdom and is not capable of having an effect in the United Kingdom.222
Exemption (e2): A "one off" financial promotion that is not a cold call2. If the conditions set out in (a) to (c) are satisfied, a financial promotion is to be regarded as "one off"; if not, the fact that any one or more of these conditions is met is to be taken into account in determining if a financial promotion is "one off", but a financial promotion may be regarded as "one off" even if none of the conditions are met; the conditions are that:22
the identity of the product or service to which the financial promotion relates has been determined having regard to the particular circumstances of the recipient;
the financial promotion is not part of an organised marketing campaign.
In addition to the rules and guidance contained in BCOBS3 and the exemptions mentioned in CRED 11.2.4 G, financial promotions (including those which are exempt) may be subject to more general rules including Principle 7 (Communications with clients) and 2SYSC 3 (Systems and controls) and the fair, clear and not misleading rule2.3 2 3 2 2
includes the name of the firm;
- (b) 3
is sufficient for, and presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received; and
does not disguise, diminish or obscure important items, statements or warnings.
Those parts of BCOBS5that relate to distance contracts for accepting deposits will have limited application to a 4credit union. This is because the Distance Marketing Directive4 only applies where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)). If, therefore, the credit union normally operates face to face and has not set up facilities to enable customers to deal with it at a distance, such as facilities for a customer to deal with it purely by post, telephone, fax of the Internet, the provisions will not be relevant. A one-off transaction dealt with by distance means in order to deal with a particular contingency or emergency will not fall under the BCOBS5 provisions.15 4 5
For those credit unions to which the provisions in BCOBS5 will apply, the provisions which are of particular relevance concern the distance communications4provisions (BCOBS 3),5 pre-contract information (BCOBS 4)5, cancellation rights (BCOBS 6)5 and the financial promotion rules4(discussed at CRED 11.2). If the credit union provides cash deposit ISAs or cash deposit CTFs4further rules may apply.15 4 4 5 4 5 4 5 4
BCOBS 3.1 5 sets out the basic requirements5 that apply5 before a credit union enters into a distance contract for accepting deposits. The credit union has to ensure that the terms on which it will conduct business, including, in particular, certain required information, is provided to a consumer4 in good time in a durable medium, before the retail customer is bound by the distance contract or offer,5 unless certain exemptions apply.15 5 4 5 5
The required information is the contractual terms and conditions and the other information set out inBCOBS 3 Annex 1 R5, and covers basic information about the credit union, the main characteristics of the service on offer, the price, details about any distance contract such as its duration, cancellation rights and any other early termination rights and penalties, and information about out-of-court complaints and compensation arrangements.14 5
where the contract is concluded by telephone and the consumer4 gives explicit consent to receiving a more limited range of information BCOBS 3.1.11 R5 sets out the information to be provided in such cases;12444545
where a means of communication is used at the consumer's request5which does not enable provision of required information in a durable medium before the consumer is bound by any distance contract or offer5; in this case full information must also be provided in a durable medium immediately after conclusion of the distance contractBCOBS 3.1.12 R;5125545
- (3) 545412
A consumer4has a right to cancel a contract5 for a retail banking service5 without giving any reasons and without penalty. The right to cancel has to be exercised within 14 days of the day of the conclusion of the contract or the day on which he received the contractual terms and conditions, if later (BCOBS 6.1.1 R)5.14 5 5 4 5
The only exemptions from the right to cancel are when:1
- (1) 5
- (2) 5441
- (3) 44445
The effects of cancellation are set out inBCOBS 6.3 (Effects of cancellation)5. Unless the contract relates to a a cash deposit ISA or a cash deposit CTF,5 the credit union has to return, no later than 30 days after the date it received notice of cancellation, any sums paid by the customer in connection with the contract. The customer can be required to pay for any services provided up to the date of cancellation, provided that the sums are in proportion to the extent of the services actually provided and could not be construed as a penalty. No payment can be required if the credit union cannot prove that a customer was told the amount that would be payable or if the credit union starts performance of the contract before expiry of the cancellation period 5 without the customer's prior consent.134 5 5