Special attention needs to be paid to the information to be provided to consumers before entering into an agreement. We believe that it is necessary to assess how much detailed information is required and how it can best be provided to consumers in order to ensure that they are well-protected.

Simplification of information

The DMFSD requires service providers to give excessively detailed information to the consumer prior to entering an agreement. Consumers often ignore information which is too complex or difficult to remember and there is evidence that simpler information with fewer figures is much more effective at landing critical messages.

Reduction of information

Regarding the pre-contractual information, it is important to focus on diminishing the number of pre-contractual documents, which service providers are obliged to serve to consumers in any case. Mobile devices can only display a limited amount of information in a clear and comprehensive way.

The way the information is provided and right of withdrawal

ESBG believes that detailed contractual terms and conditions and the information referred to in Article 3(1) and Article 4 from the Directive should be provided to the consumer on paper/another durable medium after concluding the contract (as stated in Art. 5 (2)). Even though the consumer might not have had the possibility to read all of the relevant information, they would still be protected under the right of withdrawal.

The right of withdrawal is an instrument for the consumer’s protection and when it is granted to the consumer it should diminish some of the requirements for the service providers, especially in the field of the pre-contractual information that needs to be provided to consumers. If the amount of information is not diminished, there is not a substantial meaning of the right of withdrawal.

Coherence with other pieces of legislation

The provisions of the Directive are not entirely coherent with the Consumer Credit Directive, the Mortgage Credit Directive, the Payment Services Directive, the Payment Accounts Directive, the Insurance Distribution Directive, the Markets in Financial Instruments Directive, the Packaged Retail Investment and Insurance Products and Services Directive – about the information due before signing the agreement.

GDPR, E-privacy Directive, E-commerce Directive – about the consent for direct marketing and unsolicited communications

In order to achieve a coherent and easy to apply legislation in the matter of distance marketing of financial services, we would like to stress on the regulatory approach – it would be very useful if the Directive includes only the specific requirements for the distance marketing of financial services and if there is a specific product legislation, the Directive refers to the applicable parts of this specific legislation instead of repeating them.

Goldplating

The tendency of Member States’ goldplating practices, as observed with the DMFSD, adds costs and limits the effectiveness of the EU legislation in building the single market. The European Commission should ensure a strict implementation of this Directive, which will give consumers better visibility on their level of protection in Europe.​

Identified Concerns

Some ESBG members believe that the revision of the DMFSD is both important and necessary, as it questions the efficiency of its provisions that aim at consumer protection, compromises the service itself and contradicts one of the basic principles of the distance marketing of financial services – that the service should be easy, accessible and time saving. Nevertheless this does not mean that the way distance marketing should be done should overburden the service providers.

The Directive did not anticipate that technological disruption and new digital means have brought a diverse set of innovative distribution channels. This is the main reason why some ESBG members believe that the DMFSD should be reviewed in order to adapt the legislation to the new technology and distribution channels that have emerged from the new digital context. It should also be applied to regulation and supervision on marketing, advertising and risk reporting to the services provided by new operators as those applicable to financial institutions, when rendering the same services because the purpose thereof is to protect consumers and, therefore, they must not discriminate based on who provides/offers the product or service.

ESBG is also keen to comment on some of the issues raised in the behavioural study on the digitalisation of the marketing and distance selling of retail financial services. We do not agree with attitude surveys and research suggesting that personalisation and targeting tend to be negatively perceived by consumers. Current marketing practices allow customers to receive information about unknown products. These practices must fulfil with the relevant legislation (GDPR and e-privacy) and additionally it is important to underline that the consumers always have the right to request stop receiving this advertisement information. In particular, some ESBG members are of the opinion that the format requirements for standardising product-specific legislation is a step too far and that the obligation for clear and intelligible information in product specific regulation is already sufficient. In addition, using regulation to slow down the purchasing process for financial products and services would reduce the benefit of banks’ investments for attractive and competitive customer experiences and would lead to a deterioration in the customer experience of all customers in response to possibly excessive behaviour of a minority.​

Why Policymakers Should Act

The current DMFSD is 18 years old and there have been many developments in the banking sector since then. It is important to update the text and take into account:

• new market players;
• digitalisation – financial services for consumers are nowadays presented, proposed and used in a very different business environment where technologies have a major role;
• consumers want to receive clear and manageable information in a short time;
• it is important not to overburden the consumers with information;
• the right of withdrawal is an instrument for the consumers protection and when it is granted to the consumer it should diminish some of the requirements for the service providers, especially in the field of the pre-contractual information that needs to be provided
• other EU texts which have been implemented since the financial crisis and should be consistent with the Directive. It should also state which of the requirements of the specific legislation (such as CCD, MCD, PSD 2 etc.) should be kept when distance marketing is executed.

The regulation should also avoid using the references to “vulnerable consumers”. The ECJ literature generally addresses an “average consumer who is reasonably well-informed”. To ensure legal coherence, the Directive should be grounded on the “average consumer” and not on the “vulnerable consumer”.

Background

The development of a deeper and fairer single market is one of the European Commission’s key priorities. As part of this objective, the European Commission is working to help consumers to access good quality financial services offered outside their home Member State by harmonising consumer protection rules governing distance marketing. The Distance Marketing of Financial Services Directive (DMFSD) sets out what information a consumer should receive about a financial service and its provider before concluding a distance contract. For certain financial services, it also gives the consumer a 14-day right of withdrawal. In addition, the DMFSD bans services and communications from suppliers that a consumer has neither solicited nor consented to receive.

Since its adoption in 2002, several pieces of product-specific EU legislation have been adopted in the areas of consumer credit, mortgages, payment accounts, payment services, insurance products and investment products. These acts specify, for instance, the type of information a consumer should receive about a product and its provider. The legal framework also includes general consumer protection rules on unfair commercial practices and unfair contract terms, as well as rules on the e-commerce framework, data protection and e-privacy.