The European Commission is proposing to modernise EU rules for financial services contracts concluded remotely - whether online or by telephone - to strengthen consumer protection and promote the cross-border provision of financial services in the single market.
The proposal for a directive, presented by the European Commission on Wednesday 11 May, takes up some of the relevant provisions of the 2002/65/EC directive on remote selling of financial services, such as the consumer’s right of withdrawal or the pre-contractual information to be provided by a service provider prior to the conclusion of the contract, while taking into account the considerable evolution of the financial services market since 2002 - new players and new business models have emerged - and the habits of consumers, who are increasingly buying online.
“The new rules we propose are horizontal rules. We offer a safety net for all financial services. In the event of a regulatory gap - for example, in the case of crypto-assets that are not yet subject to specific regulation, or where the specific rules do not contain comprehensive consumer protection provisions - we will thus have horizontal coverage. Consumer protection will therefore be guaranteed”, explained EU Justice Commissioner Didier Reynders at a press conference.
This proposal, based on full harmonisation, will amend the Consumer Rights Directive 2011/83/EU and repeal the 2002 Directive. It has been subject to extensive prior consultation (see EUROPE 12747/22).
Right of withdrawal. In order to facilitate the exercise of this right, the proposal would require traders to provide a withdrawal button when selling electronically. This is “to make it as easy to withdraw as it is to conclude a contract”, Didier Reynders stressed, pointing out that financial services are complex and that consumers have the right to withdraw once they have fully understood all the provisions. In addition, the trader would be obliged to send a notification of the right of withdrawal, if the pre-contractual information is received less than one day before the conclusion of the contract.
Pre-contractual information. The proposal clarifies the information to be provided to the consumer before the conclusion of a contract when digital tools are used. It would impose an obligation on the seller to provide certain information in advance, including, for example, the trader’s e-mail address, possible hidden costs, or the risk linked to the financial service. Information should also be displayed prominently on the screen, and rules would be introduced on the use of pop-ups or overlay links to provide information. The consumer should also have sufficient time to understand the information received, at least one day before the actual signing.
For online contracting, professionals would be obliged to set up transparent and fair online systems and to provide an adequate explanation when using automatic online tools (e.g. robo-advisor - an online investment advice platform - or chat boxes). If the interaction with these online tools is not entirely satisfactory, consumers would have the option of requesting contact with a human being to represent the seller.
Implementation. In the case of large-scale cross-border infringements of the new rules for remote contracts for financial services, national competent authorities could impose penalties on offenders of up to 4% of the trader’s annual turnover in each Member State concerned, but Member States would be free to impose higher fines.
Full harmonisation will ensure similar rules for all financial services in all EU Member States.
Once adopted, the new directive would have to be transposed into national law by the Member States 2 years after adoption.
It should be recalled that in 2020, the evaluation of the 2002 Directive highlighted its limited effectiveness, given that the financial services market has evolved considerably with digitalisation and the commercial practices used online by providers, not to mention the new sector-specific legislation applying to the distribution of financial and insurance services/products, and the new horizontal EU rules on consumer protection, such as the GDPR.
See the new proposal for a directive: https://aeur.eu/f/1l5 (Original version in French by Aminata Niang)