Proposal for the Directive of Distance Contracts of Financial Services Contains Several Unreasonable Requirements

The European Commission has presented a directive proposal, which foresees stricter consumer protection rules for distance contracts for financial services. In the Chamber’s opinion, some of the requirements are unreasonable, because their entail over regulating, increase costs for companies, and it is questionable if the planned amendments have the positive effect on consumers that they aim.  

Pre-contract information should be presented on day before the conclusion of the contract
The Chamber does not support the requirement contained in the proposal for the directive according to which the providers of financial services should, in case of distance contract for financial services, present the pre-contract information to the consumer at least one day before the conclusion of the contract. This amendment decreases the speed and smoothness of the provision of financial services and might not serve the interests of the consumers. For example, if the consumer wishes to use the financial service immediately, it would not be possible according to the proposal of the directive, because the provider of the financial service would have to send the pre-contract information to the consumer one day in advance and conclusion of the contract is allowed only the next day. 

In the letter sent to the Ministry of Justice we agreed that the provider of financial services should send pre-contract information to the consumer before a distance contract is concluded, but it should not be done at least one day before the conclusion of the contract, it would be enough if the consumer received the necessary information immediately before the contract is concluded.

The button for withdrawal from the contract is not necessary
According to the proposal of the directive, a company that concludes distance contracts for financial services through electronic means should create a button for withdrawing from the contract in order to make the use of the right to withdraw easier for the consumer. Such button could be located on a website and it must be clearly marked with the words “I withdraw from the contract” or similar clearly understandable expression.

In the Chamber’s opinion, there is no need for such button, because the proposal for the directive clearly states that before the conclusion of the distance contract for financial services, a company is required to present to the consumer, in a clear and understandable manner, practical instructions for exercising the right to withdraw from the contract. Furthermore, companies have informed that in practice only a very small percentage of consumers wish to withdraw from the contract. Therefore, it is questionable how reasonable it would be to request from companies making additional costs and developments if the consumers have the information they need to withdraw, and in practice there are very few consumers who use the right to withdraw.

Amendment related to the web interface may bring along over-regulation
According to the proposal of the directive, companies will not be allowed to use the structure, design, function and method of use of their web interface for the conclusion of the distance contracts for financial services in a manner that might influence or inhibit the consumer’s opportunity to make a free, independent and conscious decision or choice.

We drew the attention of the Ministry of Justice to the fact that this amendment might mean unreasonable over-regulation. First and foremost, companies see a risk that this will mean even more detailed regulation of what a website of a provider of financial services should look like. Considering that already now, advertising of financial services is regulated in great detail, and if additional requirements for websites would be added, it might unreasonably limit the options of the provider of financial services to present their service.

Too much information does not improve protection of consumers
The Chamber drew the attention of the Ministry of Justice to another potential problem. Namely, the volume of pre-contract information provided to the consumers is already significantly extensive and as a result the consumers might not be able to read the entire bulk of information before the conclusion of the contract. If the volume of pre-contract information would be further increased with the proposal of the directive, it might further decrease the motivation and ability of consumers to read the information before concluding the distance contract for financial services. Thus, the proposal of the directive may increase the consumer protection level and awareness of consumers in theory, but in practice the increased volume of information may have the contrary effect.

According to the proposal of the directive, Estonia is required to make the necessary amendments in the national legislation within 24 months from the passing of the proposal. At the moment it is not known if, when and with which content will the proposal be passed, because discussions over the proposal are ongoing.

The proposal concerning the distance contracts for financial services is available HERE.