On 11 May 2022, the European Commission has adopted a reform of the current EU rules on Distance Marketing of Consumer Financial Services.

Following the significant evolution of the sector over the last 20 years, the distance marketing of financial services to the public has seen many of the circumstances regulated by Directive 2002/65/EC on distance marketing (the “Directive”) change. Indeed, the boom of the overall digitization, the development of new technologies, new types of operators (such as fintech companies), new business models and new distribution channels have reduced the the Directive’s effectiveness in reaching its principal objectives, thus requiring an intervention by the legislator to bring the regulatory framework up to speed with the evolved scenario.

In addition, the Commission noticed that a number of EU product-specific legislative acts (e.g. the Consumer Credit Directive) and EU horizontal legislation (the General Data Protection Regulation) have been enacted after the Directive, reducing the latter’s relevance and its added value subsequently decreased. However, the Directive remained useful thanks to its horizontal application in case of distance selling of those financial products that were not yet subject to any EU legislation (e.g. in the absence of EU rules on crypto-assets, the Directive applies).

In light of the above, the Commission proposes to repeal Directive 2002/65/EC and modernise the regulatory framework by including the still relevant articles (right to pre-contractual information and right of withdrawal) into Directive 2011/83/EU (Consumer Rights Directive), extending the application of certain rules of the said Directive 2011/83/EU to consumer financial services concluded at a distance (e.g. rules on additional payments and rules on enforcement and penalties) and introducing targeted new provisions to ensure online fairness.

In particular, the area of intervention can be summarised as follows:

Easier access to 14-day withdrawal right: the market operators will have to provide a withdrawal button when selling through electronic means. Furthermore, the trader is obliged to send a notification of the right of withdrawal if the pre-contractual information is received less than a day before conclusion of the contract;

Pre-contractual information: the rules relating to the content, methods and timing of pre-contractual information are modified to reflect the technological developments in the sector. Among others, the seller will be obliged to provide certain information in advance, such as the e-mail address of the intermediary, any potential hidden costs or the risk related to the financial service. Information will also have to be displayed prominently in the screen, and the use of pop-ups or layered links to provide information will also be regulated. The new rules will ensure that the consumer is given sufficient time to understand the information received, at least a day before the actual signature;

Comprehension of financial service contracts: the Proposal obliges intermediaries to set up fair and transparent online systems and to provide an adequate explanation when using online tools (e.g. roboadvice or chat boxes). The rules also enable the consumer to request human intervention should the interaction with such online tools be not fully satisfactory;

Enforcement: the Proposal will give greater powers to the competent authorities and stronger penalties will apply to financial service contracts concluded at a distance in case of widespread cross-border infringements, with a maximum penalty of at least 4% of annual turnover;

Full legal harmonisation: the Proposal establishes similar rules for all providers across Member States.

The Commission’s Proposal is now subject to the vetting by the EU Council and Parliament.

Legália will monitor the further developments concerning online marketing of financial services and will keep you posted. Meanwhile, please do not hesitate to contact us for any further clarification on this and related topic.