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Enhanced Consumer Protection in the Digital Age

On 23 October 2023, the European Council adopted a new Directive on distance contracts for financial services. This Directive aims to simplify the existing legislation and enhance consumer protection in the field of distance financial services. It also seeks to create a level playing field for financial services concluded online, by telephone, or other remote means.

The new Directive amends provisions of Directive 2011/83/EU on distance financial service contracts by extending its scope and adding a chapter. At the same time, it repeals Directive 2002/65/EC on the distance marketing of consumer financial services.

Increased Transparency in Pre-Contractual Information Disclosure

The recently adopted Directive introduces the following changes:

» better consumer protection is ensured when accessing new financial products and services at a distance, online or by phone

» greater transparency is ensured by regulating instructions on how and when pre-contractual information should be disclosed and provided to consumers.

» ensures that consumers have the right of withdrawal from distance contracts, facilitated by a prominently displayed and easy-to-find “withdrawal function” on the service provider’s interface. Thus, enabling consumers to make their choice without any difficulty, penalty, or need to give any reason.

» ensures that consumers have the right to request human intervention when dealing with traders via fully automated online interfaces. This includes chatbots, automated advice, or interactive tools, helping consumers understand potential contractual effects on their financial or economic situation.

» ensures that the ‘safety net’ element is applied. As a result, the Directive applies to financial services that are either not covered by Union sector-specific legislation or are excluded from the scope of Union acts governing specific financial services.

» introduces additional protection for consumers against manipulative elements known as “dark patterns”, which are practices that distort or significantly impair, either intentionally or through their effects, the ability of consumers to make informed and autonomous choices or decisions.

Guaranteed Human Intervention in Automated Interactions

The adoption of the Directive focuses on adapting the framework for financial contracts concluded remotely, by phone or online. This adaptation addresses technological advances and digitisation that were not anticipated when Directive 2002/65/EC was originally adopted.

The European legislative act is currently in the final phase of the decision-making process. It is scheduled to be published in the Official Journal of the EU and will enter into force on the 20th day following its publication. The Member States will then have two years to transpose its provisions into national law.