In a significant move towards aligning with the demands of the digital age, on the 23rd of October 2023, the European Council adopted a directive on financial services contracts concluded at a distance, marking the conclusive step of the EU decision-making process. This directive simplifies the existing legislation, aiming to enhance consumer protection and establish a level playing field for financial services conducted at a distance —whether via telephones, online platforms, or other forms of remote marketing.
The newly adopted directive repeals the existing 2002 Distance Marketing Directive (Directive 2002/65/EC) (DMD) and introduces new provisions for financial services contracts concluded at a distance through the addition of a chapter to the Consumer Rights Directive (Directive 2011/83/EU) (CRD).
Key changes brought forth by the directive include a clear articulation of the scope of the application and clarifications regarding the safety net-feature for financial services. Additionally, the directive improves the rules on information disclosure, while empowering member states to enforce stricter national rules for pre-contractual obligations.
Recognizing the utilization of automated information tools by financial services, the legislative act establishes the right of consumers to request human intervention. Moreover, it introduces the right of withdrawal from contracts through the incorporation of an easy-to-find ‘withdrawal function’ in the provider’s interface, ensuring consumers are informed and empowered throughout the withdrawal period.
In a proactive measure against deceptive user interfaces, the directive introduces safeguards against dark patterns, which are designed to deceive or nudge users into making unintended choices. Certain provisions from the CRD are also extended to financial services distance contracts, covering aspects such as inertia selling, additional payments, enforcement, and reporting.
This legislative milestone is part of the European Commission’s consumer agenda, which was launched in 2020 to update the EU’s consumer policy framework, which garnered support from the Council in February of 2021. Following the Council’s approval of the European Parliament’s position, the legislative act has been officially adopted. After being signed by both the President of the European Parliament and the President of the Council, the directive will be published in the Official Journal of the European Union, and its provisions will take effect on the 20th day following publication, ushering in a new era of digital market protection for consumers in the European single market. Member States will then have 24 months to publish and implement transposing measures and another six months to apply them.
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