Distance Marketing in Financial Services: New Directive Finalised

On 23 October 2023, the European Council adopted a directive concerning financial services contracts concluded at a distance, following approval by the European Parliament. This marks the final step of the EU decision-making process.

In the context of rapid technological developments in the financial services market, the Directive will simplify existing legislation, improve consumer protection, and create a level playing field for financial services concluded online, via telephone or through other forms of remote marketing. The Directive modernises a sector of financial regulation which has not been substantially amended since the early 2000s.  Market practitioners will also be aware that Ireland’s Consumer Protection Code regime is expected to be amended in the next year or so and therefore implementation of the Directive will need to be considered alongside that review.     

Legislative reform

The new Directive revises the current legal framework by repealing the existing Distance Marketing Directive (Directive 2002/65/EC), while including new and updated rules regarding financial services contracts concluded at a distance in a new chapter of the Consumer Rights Directive (Directive 2011/83/EU), which protects consumers engaging in all types of commercial practices.

Some of the key changes

The new rules under the Directive: 

  • Offer clarity on the scope of the rules’ application
  • Enhance the existing rules on information disclosure and modernise pre-contractual information obligations, with Member States given the option to impose stricter national rules in this area
  • Establish the right of consumers to request human intervention if dissatisfied with websites that display automatic information tools (e.g. robo-advisors or chatbots) so that that they can better understand the effects of the contract on their financial situation
  • Facilitate the right of withdrawal from contracts concluded at a distance – financial services providers are now required to make the withdrawal process readily accessible by featuring an easy to use and prominent “withdrawal function” on their platforms
  • Introduce protections for consumers against dark patterns (deceptive user interfaces designed to manipulate users into taking unintended actions, such as buying products that they did not intend to buy), with Member States given the option to impose stricter national rules in this area.

Next steps

After being signed by the President of the European Parliament and the President of the Council, the new Directive will be published in the EU Official Journal and will enter into force 20 days later. Member States will then have 24 months to publish transposing measures and another six months to apply them.

Key contacts

For more information please contact Patrick Brandt (Partner), Kevin Allen (Partner), Christopher Martin (Of Counsel), Louise Hogan (Associate), Sarah Lee (Senior Knowledge Lawyer) or any member of ALG's Financial Regulation Advisory team.

Date published: 14 November 2023