Stronger consumer rules for online financial services
Written By
Regulatory and Public Affairs Director
Belgium
Ireland
As Regulatory & Public Affairs Director in Brussels, I assist companies facing an unprecedented wave of new EU regulation that will have an impact on every business operating in the digital and data-related economy. I help companies navigate complex EU decision-making processes and understand the practical application of the law to their sectors.
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The Commission adopted a reform of the current EU rules on Distance Marketing of Consumer Financial Services last week and published a public consultation about this initiative.
The deadline is on 8 July 2022 and the link to the consultation is available here.
Since 2002, when the first rules were introduced, online financial transactions have increased substantially and new business models and distribution channels have emerged. The Directive proposal, amending rules concerning financial services contracts concluded at a distance, aims to strengthen consumer rights and to adapt the existing rules to the current market trends.
Main takeaways of the reform
The review proposes several new initiatives and obligations:
- 14-day withdrawal right for distance contracts for financial services, without penalty and without giving any reason. This right would be subject to some exemption, including inter alia:
- consumer financial services whose price depends on fluctuations in the financial market outside the traders control, which may occur during the withdrawal period, such as services related to crypto-assets as defined in the MiCA Regulation proposal
- travel and baggage insurance policies or similar short-term insurance policies of less than one month's duration
- contracts whose performance has been fully completed by both parties at the consumer's express request before the consumer exercises his right of withdrawal
- Withdrawal button, clearly labelled with the words “Withdraw from Contract” or a corresponding unambiguous formulation
- It shall be placed in a prominent manner and permanently available during the entire withdrawal period on the same electronic interface as the one used to conclude the distance contract
- Electronic communications: obligations on the seller to provide certain information upfront, including for instance the e-mail address of the trader, any potential hidden costs or the risk related to the financial service
- Obligation to set up fair and transparent online systems and to provide an adequate explanation when using online tools (roboadvice, chat bots, live chat or similar approaches)
- The rules also empower the consumer by introducing the option to request and obtain human intervention
- Additional protection regarding online interfaces: Member States shall adopt measures requiring that traders, when concluding financial services contracts at a distance, do not use the structure, design, function or manner of operation of their online interface in a way that could distort or impair consumers’ ability to make a free, autonomous and informed decision or choice
- Stronger penalties will apply in case of widespread cross-border infringements, with a maximum penalty of at least 4% of annual turnover
To recall, Article 2 of the Directive 2002/65/EC on distance marketing of financial services (currently in force), defines ‘financial service’ as “any service of a banking, credit, insurance, personal pension, investment or payment nature”.
Next steps
Both co-legislators, the Council of the EU and the European Parliament will discuss the Commission proposal in the coming months. In the text presented by the Commission, the transposition period is of 24 months from the adoption of the Directive, at the latest.
More information about this initiative is available here
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