In November 2023, the EU legislator adopted the new Directive regarding financial services contracts concluded at distance.
This Directive essentially aims to modernise the existing legal framework governing distance contracts for financial services concluded between a professional and a consumer. For the record, a "financial service" is defined as any service relating to banking, credit, insurance, personal pensions, investments and payments.
The European legislator has focused on the following subjects: (i) pre-contractual information, (ii) the right of withdrawal, (iii) the obligation to provide adequate explanations concerning distance contracts for financial services, and (iv) the application of certain rules from the Directive on Consumer Rights to distance contracts for financial services.
New rules introduced by the Directive include:
- the obligation for professionals to provide pre-contractual information at least one day before the consumer is bound by a distance contract. The aim is to give consumers enough time to read and understand the pre-contractual information, compare offers and make informed decisions;
- the obligation for professionals to indicate an e-mail address in the pre-contractual information (and not just their telephone number);
- the obligation on professionals to provide consumers with the possibility of using a withdrawal facility when a distance contract is concluded electronically. The European legislator intends to ensure that the right of withdrawal is exercised effectively, and to this end has introduced requirements designed to ensure that the procedure for exercising the right of withdrawal is no more burdensome than the procedure for concluding the distance contract. Accordingly, the withdrawal facility must be clearly formulated (with unambiguous wording such as " withdraw from the contract here"); the relevant tab must be prominently displayed and easily accessible;
- the obligation for professionals to provide consumers with adequate explanations about the financial services contracts on offer to enable them to assess whether the contracts are suited to their needs and financial situation. These explanations must be provided free of charge to the consumer prior to the conclusion of the contract;
- where a professional uses online tools in the context of concluding distance financial services contracts (e.g. robo-advisors or chat boxes), the consumer will be entitled to request and obtain human intervention. This human intervention must be available at different stages: the pre-contractual stage, during the term of the contract, and in the event of renewal;
- this Directive extends the scope of certain rules from the Directive on Consumer Rights to distance contracts for financial services, including rules on additional payments, performance and penalties.
The Directive will enter into force on 18 December 2023 (i.e. 20 days following its publication in the Official Journal). Member states will have two years to implement the rules into national law, and a further six months to apply them (i.e. as from 19 June 2026).