Updated rules for distance marketing of consumer financial services were finalised today by the EU Council, following approval by the European Parliament. The next step is publication in the Official Journal.  Member States must, not more than 24 months + 20 days later, publish transposing measures (including provisions regarding penalties/enforcement), and apply the new rules 6 months after that.

The Commission announced its proposals in May 2022 (read our insights here).

The existing Directive will be repealed. The new rules will sit in a dedicated chapter of the 2011 Consumer Rights Directive (CRD). With limited exceptions, the new rules will be ringfenced from the existing CRD provisions (albeit provisions of the CRD regarding inertia selling and reporting will apply to distance marketing of financial services contracts).

Pre-contractual information (PCI):

• PCI will need to include information on electronic means of communication, the environmental or social objectives targeted by the financial service, and the consequences of late / missed payments.
• A consumer must be told before they are bound by a distance contract if the price was personalised based on automated decision making.
• All PCI should be provided on a durable medium, be easy to comprehend and in a readable format. The recitals clarify what constitutes “a readable format”.
• The recitals clarify how PCI can be adapted to take account of the technical constraints (e.g. character restrictions on phone screens).
• The recitals address layering (splitting the PCI between different layers) – the recitals set out the approach that should be taken when layering is used, and reiterate that the consumer should be able to print all the parts of the PCI in one single document.
• Providing PCI electronically using a ‘table of contents’ approach with expandable headings is also addressed in the recitals – again the consumer must able to download the PCI and save it as a stand-alone document.
• The recitals emphasise that simply reproducing PCI to try to meet any ‘adequate explanation’ requirement “should be avoided”.

Withdrawal:

• The withdrawal button proposal has been updated with a requirement for a withdrawal function (labelled “withdraw from contract here” or similar) which must be prominent and continuously available during the withdrawal period. This applies to all distance contracts with a withdrawal right under the CRD, not just financial services contracts.
• If PCI is provided less than 1 day before a consumer is bound by a distance contract, the consumer must be reminded of the withdrawal right between 1 and 7 days after the contract date.
• If the consumer doesn’t receive the PCI and T&Cs, the withdrawal period will last until 12 months and 14 calendar days after the contract date. The withdrawal period won’t expire if the consumer isn’t told in a durable medium about the withdrawal right.
• EU Member States may provide that consumers cannot be required to pay for withdrawing from an insurance contract.

Fairness:

• Consumers must be able to request human intervention if dissatisfied with the use of online tools (e.g. chatbots / roboadvice).
• Provisions have been included to prevent the use of dark patterns (practices materially distorting or impairing consumers’ ability to make autonomous, informed decisions).

NB:

• If applicable EU sectoral legislation also provides for PCI, adequate explanations or a withdrawal right, the provisions of the sectoral legislation will prevail.
• The reflection period set out in the Mortgage Credit Directive can be applied to credit agreements that are outside of its scope.
• Member States are encouraged to take account of the specific needs of micro enterprises and SMEs when transposing the new rules.
• The Commission has also been asked to look at influencer marketing practices on social media.