Cancellation rights for financial services
Under the Right of Cancellation Act, as a general rule, consumers have the right to cancel agreements related to financial services that are concluded by distance selling or outside of fixed business premises.
Download the cancellation form here:
Definitions
According to the Right of Cancellation Act, it means any service that has the character of banking, credit, insurance, individual pension, investment or payment service. Typical examples are account agreements, framework agreements on payment brokerage, loan agreements, collateral agreements, life and non-life insurance products, etc.
It refers to the entity providing a financial service (for example, a bank or an insurance company).
This means any agreement that is entered into entirely without you and the bank’s/enterprise’s representative meeting face-to-face, for example, agreements entered into online, by email, telephone, text message or by regular post. However, in order for this to be regarded as distance selling under the law, service providers must have facilitated, and marketed, the distance selling used.
This could be, for example, agreements entered into at fairs or on the street. Agreements entered into at your home do fall under the law, but only if the bank’s/enterprise’s representative visits you without your express request for this service, or if agreements are entered into outside of what you expected when you asked the service provider to come to your home.
Where a framework agreement has been entered into, followed by individual tasks or processes, the Right of Cancellation Act only applies to the initial framework agreement. An example may be that you enter into an agreement on online banking through distance selling. For the online bank agreement, the disclosure and cancellation rights rules apply, but not for the subsequent payment orders via the online bank.
FAQs about cancellation rights
- For services where the price depends on fluctuations in the financial market that the service provider does not have an influence on and which may occur during the cooling-off period (for example fixed-rate loans, exchange of currencies, shares, including unit linked, etc.).
- For insurance contracts with a shorter duration than one month
- For agreements which, at the consumer’s explicit request, have been fulfilled by both parties before the consumer exercises his/her cancellation right (for example a payment transfer), for credit secured by a mortgage in property or in rights related to property (for example, housing cooperative entities)
Some financial services have tax advantages, such as the BSU home savings scheme and Individual Pensions Savings Agreements (IPA). If you use your cancellation rights on such an agreement, you will of course not be able to claim a deduction for the deposit. The same applies to loans: If you use your cancellation rights, you will not be able to claim tax deductions for anything other than any net interest paid as well as for front-end fees and the like.
As a general rule, the right of cancellation period is 14 days. For distance selling of life insurance and individual pension schemes (IPAs), the deadline is still 30 days. Sales outside of a fixed point of sale of life insurance and IPAs follow the general rule in terms of a 14-day cancellation right period.
The deadline is calculated from the time the agreement is entered into and you have received all the information required by the Right of Cancellation Act and in the way the Right of Cancellation Act requires. In Section 7a, the Right of Cancellation Act specifies the advance information needed for distance selling. You can get information about the law if you contact a service provider, the Norwegian Consumer Council on 815 58 200 or on their website or you can read it on the lovdata website
If you carry out several separate transactions of the same type with less than one year’s gap, without any initial agreement on the service, the disclosure obligation applies to the first transaction only.
For distance selling, Section 9 a of the Right of Cancellation Act also requires that the service provider send you the complete terms and conditions in advance within a reasonable amount of time. If the agreement is entered into at your request, and a remote communication method is used that does not make it possible to provide contractual terms and advance information before the agreement is entered into, the service provider must fulfil their obligations immediately after the agreement has been entered into.
Advance information and contractual terms and conditions must be provided in writing on paper or another durable medium that you can use. Among other things, a durable medium ensures that the service provider will not be able to change the content at a later date. An example of a durable medium can be an email.
In the case of sales outside of a fixed sales location, the Right of Cancellation Act requires that the service providers give you the information specified in the Right of Cancellation Act, Section 7 a, letters j) and k), on a durable medium that you can use.
Cancellation rights for distance selling
If you exercise the right of cancellation on a remote sales agreement, the parties’ obligations to fulfil the agreement lapse. If the agreement is fully or partially fulfilled, you must return to the service providers that which you have received. This must be done within 30 days after you have sent the notification about using the cancellation rights.
In the same way, the service provider must pay back the fee you have paid for the service itself. However, you will not be entitled to a refund for the service provider’s front-end fee, deposit fee or similar. The same applies to amounts that you have paid to others through the service provider, for example, to the appraiser, registration fees and the like. The service provider must repay the fee as mentioned within 30 days after the service provider has received notification that the cancellation rights will be used.
If you have signed a remote sales agreement and explicitly requested that the agreement commence before the right of cancellation expires, the service provider may claim compensation for the time you have used the financial service. The fee must be reasonable in relation to the scope of the service already provided compared to the full fulfilment of the agreement.
Cancellation rights outside the fixed business premises
If you exercise cancellation rights on an agreement entered into outside the service provider’s fixed place of sale, the parties’ obligations to fulfil the agreement will lapse. If the agreement is fully or partially fulfilled by any of the parties, a refund must be made. The service provider must repay the fee as mentioned within 14 days after the service provider has received notification that the cancellation rights will be used. You must then repay/return the benefit you have received as part of the agreement within a reasonable time. If the return obligation of both parties concerns money, the service provider is entitled to make net settlements.
If you do not exercise cancellation rights, the agreement will be binding on both parties as it was entered into. But be aware that for some agreements, you will still have access to terminate the contractual relationship at any time, regardless of the Right of Cancellation Act. According to the Financial Contracts Act, this applies to loan agreements, most of the defined-contribution agreements and framework agreements on payment transactions, among other things. According to the Insurance Contracts Act, special rules on terminating and moving the product apply. Special terms and conditions may apply, and if so, ask for more detail from the service provider.
This is a brief and simplified introduction. You will find the full details in the Right of Cancellation Act.
The Norwegian Consumer Council can also provide guidance on cancellation rights, tel. 03737 or their website.