On 5 October 2023, the European Parliament announced that it has endorsed the new directive on financial services contracts, after a vote by MEPs.
The directive, which was agreed between the European Parliament and Council in June 2023, revises the current legal framework for financial services contracts at a distance, given rapid technological developments in the financial services market. The law will boost consumer protection online and provide legal clarity to traders.
The new rules include:
- Effective right of withdrawal: Additional safeguards to allow consumers to withdraw from any distance contract via a withdrawal function, which is prominently displayed, easily accessible and continuously available during the entire 14-day withdrawal window. This should increase consumers’ awareness of their right to withdraw from a contract; at the same time, it should ensure they can withdraw from a contract as easily as they can sign one.
- Right to pre-contractual information: Clear requirements for what information the trader needs to provide to the consumer before concluding a distance contract. Consumers must have sufficient time to read and understand pre-contractual information, compare offers and make an informed decision.
- Phone communication: When traders contact consumers by phone, the commercial purpose of the call needs to be disclosed at the start and the consumer needs to be notified if the call is being recorded.
- Adequate explanations: In order to better assess a contract, consumers will have a right to receive adequate explanations from traders before signing (free of charge) and to request human intervention when using fully automated online interfaces (e.g. chatbots).
- Ban on dark patterns: Financial services providers will be prohibited from deceiving or “nudging” consumers into making choices that may be against their interest via their website designs (e.g. dark patterns), for example by presenting choices in a non-neutral manner.
Once the European Council formally adopts the text, the directive will be published in the Official Journal of the European Union and will enter into force 20 days later. Member States will then have 24 months to transpose the rules into national law and another six months to apply them.