Brussels, 28 March 2023
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Clear rules on what information must be provided prior to concluding a contract
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Simple, legible and quick withdrawal function from contracts online
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Consumers protected from manipulative practices and “dark patters” online
The new rules aim to better protect consumers when they conclude a contract for a financial service at a distance, be it by phone or online.
On Tuesday, the Internal Market and Consumer Protection committee adopted its position on the reform of the EU rules on financial services contracts concluded at a distance with 25 in favour, none against and 18 abstentions. MEPs introduce several changes to the Commission proposal, to further protect consumers from misleading marketing practices and empower them to make autonomous and informed decisions.
Clear rules and support for consumers
In order to ensure the consumer has sufficient time to read and understand the pre-contractual information, compare offers and make an informed decision, MEPs propose an obligation for the trader to provide information “in good time” prior to the conclusion of the distance contract. Consumers will also have the right to request human intervention when they are interacting with a trader online (e.g. via chatbot).
Right to withdraw
In situtations where distance financial services contracts are concluded online (through a website or an application) additional safeguards are needed to ensure consumers can withdraw from the contract in a “visible, simple and rapid manner, and as easily as they were able to conclude it”, insist MEPs. This withdrawal function must be clearly labelled, easily accessible and permanently available during the entire withdrawal period. The consumer must receive a confirmation from the trader confirming the withdrawal.
Consumers must be guaranteed 14 calendar days to withdraw from contracts, without being penalised or provide any explanations. MEPs extend the standard period to 30 calendar days for distance contracts related to personal pension operations.
Prohibiting “dark patterns” and risk warnings
Providers of financial services should be prohibited from deceiving or “nudging” consumers into making choices, which may be against their interest (e.g. “dark patterns”). Exploitative website designs, more difficult termination of a contract, using pre-ticked boxes, making certain choices more difficult or time-consuming must therefore be banned, according to the draft report.
In an effort to prevent misleading “influencer marketing” practices, MEPs put forward additional measures to ensure that any person or company wishing to advertise a financial services product on social media has to prominently label whether they have the appropriate competence to do so and whether they have received any remuneration for the promotion.
Quote
The rapporteur Arba Kokalari (EPP, SE) said: “The update of this Directive is a step forward to modernise our consumer protection rules online. As more and more people are concluding financial services contracts online, we need rules that are fit for the digital future. This proposal upholds strong consumer protection, harmonises rules in the EU single market and makes it easier for consumers to withdraw from distance contracts online. It shall be just as easy to withdraw from a contract, as it is to conclude a contract”.
Next steps
The Council adopted its negotiation position on 2 March 2023. Interinstitutional negotiations with member states can start after plenary gives its green light (expected at the 17-20 April session).
Background
Rapid technological developments have brought significant changes to the financial services market over the last 20 years, with the arrival on new financial services and products. The COVID-19 pandemic further accelerated the use of online shopping and witnessed an increase of concluding contracts “at a distance” (i.e. without the physical presence of the trader or consumer).
In order to ensure consumers continue to be well protected in an increasingly digitalised world, the Commission put forward a proposal to simplify and modernise existing rules on financial services contracts and consumer rights. These rules serve as a “safety net” for financial services, which are not covered by other sector specific EU legislation (e.g. consumer credits, mortgages).