- Parliament holds final vote on new rules for financial services contracts concluded at a distance
- Easy withdrawal from all types of online contracts via “withdrawal function”
- Consumers protected from manipulative online practices (e.g. dark patterns)
MEPs sign off new rules to protect EU consumers from misleading online financial marketing practices and empower them to make informed decisions when concluding remote contracts.
On Thursday, Parliament formally endorsed the new bill on financial services contracts concluded at a distance with 548 votes in favour, 4 votes against and 14 abstentions.
The directive, which was agreed between Parliament and Council in June 2023, revises the current legal framework given rapid technological developments in the financial services market. The law will boost consumer protection online and provide legal clarity to traders. The directive serves as a “safety net” - meaning that all financial services which are not covered by specific sectoral legislation (e.g. consumer credits, mortgages) will be covered by these rules.
The new rules include:
- Effective right of withdrawal: Additional safeguards to allow consumers to withdraw from any distance contract via a withdrawal function, which is prominently displayed, easily accessible and continuously available during the entire 14-day withdrawal window. This should increase consumers’ awareness of their right to withdraw from a contract; at the same time, it should ensure they can withdraw from a contract as easily as they can sign one;
- Right to pre-contractual information: Clear requirements for what information the trader needs to provide to the consumer before concluding a distance contract. Consumers must have sufficient time to read and understand pre-contractual information, compare offers and make an informed decision;
- Phone communication: When traders contact consumers by phone, the commercial purpose of the call needs to be disclosed at the start and the consumer needs to be notified if the call is being recorded;
- Adequate explanations: In order to better assess a contract, consumers will have a right to receive adequate explanations from traders before signing (free of charge) and to request human intervention when using fully automated online interfaces (e.g. chatbots);
- Ban on dark patterns: Financial services providers will be prohibited from deceiving or “nudging” consumers into making choices that may be against their interest via their website designs (e.g. dark patterns), for example by presenting choices in a non-neutral manner.
The rapporteur Arba Kokalari (EPP, SE) said: “With digital innovations advancing rapidly in the past 20 years, it was time to update and modernise the rules governing the purchase of financial services online. Consumers will now receive a higher level of protection than before, and it will be as easy to withdraw from a contract as it is to make one. These clearer rules are a win-win for consumers and businesses”.
Once Council formally adopts the text, the directive be published in the EU Official Journal and enter into force 20 days later. Member states will then have 24 months to transpose the rules into national law and another six months to apply them.
The 2002 Distance Marketing of Financial Services Directive (DMFSD) provides protection to consumers when signing a contract with a retail financial services provider at a distance (e.g. phone or the internet). The 2011 Consumer Rights directive (CRD) on the other hand regulates the information given to consumers before they purchase goods, services and digital content, and the right to cancel online purchases in the EU. The updated rules adopted today aim to simplify the current legal framework by repealing the existing DMFSD, while including relevant aspects of consumer rights regarding financial services contracts concluded at a distance within the scope of the horizontal CRD.