COBS 15.4 Effects of cancellation

By exercising a right to cancel, the consumer withdraws from the contract and the contract is terminated.

1. (1)

   This rule applies in relation to a distance contract that is not a life policy, personal pension scheme, cash deposit ISA, cash-only lifetime ISA3 or CTF.

2. (2)

   When the consumer exercises their3 right to cancel they3 may be required to pay, without any undue delay, for the service actually provided by the firm in accordance with the contract. The performance of the contract may only begin after the consumer has given their3 approval. The amount payable must not:

   1. (a)

      exceed an amount which is in proportion to the extent of the service already provided in comparison with the full coverage of the contract; and3

   2. (b)

      in any case be such that it could be construed as a penalty.

3. (3)

   The firm may not require the consumer to pay any amount on the basis of this rule unless it can prove that the consumer was duly informed about the amount payable, in conformity with the distance marketing disclosure rules1. However, in no case may the firm require such payment if it has commenced the performance of the contract before the expiry of the cancellation period without the consumer's prior request.

1. (1)

   The firm may require the consumer to pay for any loss under a contract caused by market movements that the firm would reasonably incur in cancelling it. The period for calculating the loss shall end on the day on which the firm receives the notification of cancellation.

2. (2)

   This rule:

   1. (a)

      does not apply for a distance contract or for a contract established on a regular or recurring premium or payment basis; and

   2. (b)

      only applies if the firm has complied with its obligations to disclose information concerning the right to cancel.

The firm must, without any undue delay and no later than within 30 calendar days, return to the consumer any sums it has received from him in accordance with the contract2, except for any amount that the consumer may be required to pay under this section. This period shall begin from the day on which the firm receives the notification of cancellation.

The firm is entitled to receive from the consumer any sums and/or property he has received from the firm without any undue delay and no later than within 30 calendar days. This period shall begin from the day on which the consumer dispatches the notification of cancellation.

Any sums payable under this section on cancellation of a contract are owed as simple contract debts and may be set off against each other.