Distance Marketing of Financial Services Directive – EU co-legislators agree on final rules

In June 2023, the EU co-legislators, the European Parliament and the Council of the EU, reached a political agreement on the European Commission proposal for a Directive concerning financial services contracts concluded at a distance (DMFSD).

The new Directive aims to create a level playing field for financial services concluded online, via telephone or through other forms of remote marketing. It repeals the existing 2002 directive (Directive 2002/65/EU), and it introduces new provisions for financial services contracts concluded at a distance as an additional chapter of the general Consumer Rights Directive (CRD - Directive 2011/83/EU) which applies to all kinds of commercial practices. 

Leaseurope has been closely monitoring this file and has been engaging with EU stakeholders in order to ensure that only the existing sector-specific legislation (e.g. Consumer Credit Directive) would apply to specific financial services contacts, and not the new horizontal distance marketing rules. Moreover, Leaseurope called for a precise expiry period during which the right of withdrawal can be exercised in order to ensure contract certainty. 

In May 2023, Leaseurope and Eurofinas together with other financial services associations published a Joint Statement on the review of the DMFSD. The Joint Statement reiterated that for the financial services industry, the prevalence of sectoral specific rules is of utmost importance. Amongst others, the Joint Statement highlighted the need for financial services providers to be granted sufficient room for manoeuvre with regards to the online withdrawal, so that they can adjust IT solutions linked to withdrawal button suitable for consumers and bespoke to their specific business model. 

The political agreement clarifies the scope of application and the safety net character of the directive. This means that EU sector-specific financial legislation takes precedence and the new distance marketing rules will not apply, when it contains rules on pre-contractual information or on the exercise of the right of withdrawal or on adequate explanations, irrespective of the level of detail of these rules. In addition, financial services that are excluded from other sectoral financial legislation or only partially covered by it, will fall within the scope of the new distant marketing rules. 

The new distant marketing rules aim furthermore to improve the rules on information disclosure and to modernise pre-contractual information obligations, according to which information will need to be provided “in good time” before the conclusion of the contact.  

Where the trader uses online tools, such as robo-advice or chatbots, the consumer will have the right to request human intervention, in order to better understand the effects of the contract on his or her financial situation. 

For (all types of) distance contracts concluded by means of an online interface, such as through a website or application, service providers will have to enable the exercise of the right of withdrawal, in addition to the written form, with the inclusion in their interface of a “withdrawal function” which is easy to find. The objective of this withdrawal function is to ensure that to withdraw from a contract is not more burdensome than to enter it. 

Finally, the withdrawal period will in any case expire 12 months and 14 days after the conclusion of the distance contract (even when the contractual terms or the pre-contractual information were not sent), provided that the consumer has been informed about his or her right of withdrawal. 

The political agreement needs to be endorsed and formally adopted by both the EP and the Council of the EU. Following that, the Directive will be published in the Official Journal of the European Union (EUOJ). Upon publication of the Direction in the EUOJ, Member States will have 24 months to transpose the new rules into national legislation.