Your right to cancel a financial product
The cancellation for most financial products can be made in writing, by fax, by email, or to a website address or portal that the provider has given.
The cancellation can be given verbally, if the financial product provider has said cancellation can be made in that way.
There are some financial products where the right to cancel doesn’t apply. Examples of these include:
- A financial service where the price of that service depends on fluctuations in the financial markets beyond the control of the product provider
- Services that you have already had the full benefit of
- Some specific products and services set out in the Financial Services Regulations.
Find out more about how to cancel a contract without being penalised.
- The Financial Services Regulations cover the sale of the main financial services you're likely to use - ie those related to banking, credit, insurance, personal pension investment or payments
- Generally you have 14 days to cancel, starting from the day of purchase
- If you cancel, then you should get a refund of the money you've paid within 30 days of the provider receiving your cancellation
- Remember, once the 14 day cancellation period has passed, there's no automatic right to end the contract and walk away
Refunds after cancellation
If you cancel, then you should get a refund of the money you've paid within 30 days of the provider receiving your cancellation.
The provider can make a deduction from the refund in relation to any services it has provided you with during the 14-day cancellation period.
Any deduction must be reasonable and can only be made if you started receiving services before the 14 days were up.
Use your cooling-off period
The Financial Services (Distance Marketing) Regulations 2004 apply to the sale of financial products bought at a distance. For example, sales made online or by phone.
These regulations apply whether the contract is made direct with the provider of the financial product or through any intermediary.
The regulations cover the main financial services you're likely to use - ie those relating to banking, credit, insurance, personal pension, investment or payments.
They state that you can cancel the contract for a financial product within 14 days of the date of purchase.
This timeframe applies to most financial products, but there are some exceptions.
For pension products, you get 30 days from when you enter into the contract, and for life insurance you have 30 days from when you're told that the provider has agreed to accept you for cover.
Some savings products also have different rules.
Cooling-off periods for fixed rate savings products
Fixed-rate savings products do not have an automatic right to cancel or cooling-off period, unless that product is a cash deposit Isa.
Fixed-rate bonds could have a right to cancel, but only if the price of the bond does not depend on fluctuations in the financial market outside the bank’s control.
In relation to any products, the bank or building society offering the products can choose to provide longer or additional cancellation rights if they want to, as long as these rights are at least as favourable to the you as they would be under the FCA Rules.
This means that any cooling-off period/right to cancel offered voluntarily should be for a least 14 or 30 days depending on the product.
What if you're outside the cooling-off period?
Insurance products, such as motoring, household and buildings insurance, tend to be annual contracts - so once the 14-day cancellation period has passed, there’s no automatic right to end the contract and walk away.
Even if you're making payments monthly, it doesn’t mean you aren’t committed to an annual contract.
It just means that the insurer has agreed to take the annual premium in instalments, rather than expect you to pay the premium as a lump sum at the outset.
Before you take out the insurance, you'll need to check the terms and conditions to see if they provide for a pro-rata refund and, if so, how much you would get.
Take note though, that if you cancel a contract outside the cooling-off period, you may incur hefty charges.