Today, the European Commission adopted a reform proposal to modernize current EU rules on distance marketing of consumer financial services. The aim is to strengthen consumer rights and promote the cross-border provision of financial services in the EU single market.
Since the adoption of the rules on distance marketing of financial services in 2002, this market has evolved significantly with advancements in digitalization, new types of financial services, and pandemic-related increases in online transactions.
The modernization proposal, which will be discussed in the Council and European Parliament next, includes the following measures:
- Improved exercise of the 14-day right of withdrawal: For electronic sales for financial services, businesses must provide a button to make it easier for consumers to exercise their right of withdrawal. In addition, companies are required to provide a notice on the right of withdrawal if the consumer receives the pre-contractual information less than one day before the conclusion of the contract.
- Clear rules on pre-contractual information: To modernize electronic communications, companies will be required to provide certain information in advance – for example, their email address and hidden costs or risks of the financial service.
- This information must be clearly displayed on the screen and the use of pop-ups or link layers to provide information will also be regulated. Thus, consumers should have sufficient time to process the information they receive at least one day before actually signing the contract.
- Consumer protection when concluding online financial service contracts: For a better understanding on financial service contracts online, companies will be required to set up fair and transparent online systems and provide adequate explanations when using online tools, such as robo-advice or chat boxes. Human intervention will also be required if the consumer interaction with online tools is not fully satisfactory.
- Enforcement: The competent authorities are to be provided with the means for more effective enforcement. Stricter penalties will apply to cross-border infringements for financial services contracts concluded at a distance – with a maximum of at least four percent of revenue.
- Harmonization in the internal market: To ensure the same high level of consumer protection, this legislation will be fully harmonized in all member states and similar rules will be introduced for all providers.
Monique Goyens, BEUC Director General, commented: "In an era where over-indebtedness is one click away, this proposal comes at the right time. For too long now, consumers have been falling victim to financial offers that are simply too good to be true, with next to no protection due to completely outdated legislation. This proposal will bring consumer rights in financial services into the digital age, responding to the financial industry increasingly targeting consumers online. Services like 'Buy Now Pay Later' have grown rapidly and use deceptive practices to tempt consumers into debt, with many simply unaware of what they are entering into. This review is not only going to protect debtors, it will also protect consumers when making investment decisions online and create a fairer online marketplace for financial services."
Source: EC & BEUC
More information and the BEUC press statement