EU Directive on Distance Marketing of Financial Services: One month to the transposition deadline

There is now just over a month to go until the deadline for transposing the EU Directive on financial services contracts concluded at a distance (EU Directive 2023/2673) (the “2023 Directive”), with legislation giving effect to the 2023 Directive then applying from 19 June 2026. The 2023 Directive, which repeals and amends existing legislation, imposes obligations around the information to be provided and rights that must be granted when entering into distance contracts with consumers for the supply of financial services (“FS distance contracts”). 

Overview

The 2023 Directive repeals the current Directive governing distance marketing of consumer financial services (Directive 2002/65/EC) and amends the EU Consumer Rights Directive (Directive 2011/83/EU), which did not previously apply to financial services, such that certain additional consumer protection obligations now also apply in the financial services context. 

The purpose of these amendments is to consolidate and streamline the existing legislation, whilst also updating the legislative framework to better align with market developments (in particular, rapid technological developments and digitalisation of financial services contracts). 

Key features

The 2023 Directive extends certain obligations in the EU Consumer Rights Directive to FS distance contracts. These include:

• pre-contractual information requirements for contracts concluded on online marketplaces;
• prohibitions on fees for the use of certain means of payments; and
• limitations on charges for consumers when contacting the trader under an FS distance contract via telephone.

In addition, the 2023 Directive introduces new obligations for traders entering into FS distance contracts. In particular:

• Pre-contractual information: Prior to conclusion of the contract, the trader must provide the consumer with certain information, including details relating to the trader, the main characteristics of the financial service and details of the price, including fees and charges, to be paid by the consumer. 
• Adequate explanations: Prior to the conclusion of the contract, the trader must provide the consumer with ‘adequate explanations’ concerning the contract that make it possible for the consumer to assess whether the contract and ancillary services are adapted to the consumer’s needs and financial situation. In addition to the required pre-contractual information, these adequate explanations must include details of the specific effects the proposed contracts may have on the consumer (such as the consequences of late payment or default). 
• Right of withdrawal: The 2023 Directive establishes rights of withdrawal (subject to exceptions in certain circumstances / for certain types of contracts) for FS distance contracts:
  • Consumers must have a period of 14 calendar days to withdraw from the contract without penalty. This withdrawal period begins either on the day the contract is concluded or the day on which the consumer receives the contractual terms and conditions and the pre-contractual information, if later.
  • If the consumer does not receive the contractual terms and conditions and pre-contractual information, the withdrawal period will expire 12 months and 14 days after the conclusion of the contract. However, the withdrawal period will not expire at all if the consumer is not informed via durable medium about the right of withdrawal. 
  • If the contract is concluded by means of an online interface, the trader must ensure the consumer can withdraw from the contract by using an easily identifiable withdrawal function. 

Notably, however, where sector-specific EU law applies to FS distance contracts and contains rules relating to pre-contractual information, adequate explanations and rights of withdrawal, only the obligations imposed under that sector-specific law, and not the relevant 2023 Directive obligations, will apply. As an example, the 2023 Directive expressly provides that pre-contractual information requirements in MiFID II should apply rather than the equivalent obligations in the 2023 Directive. 

However, if sector-specific laws only partially cover these obligations (for example, the sector-specific laws do not include a right of withdrawal) then the relevant parts of the 2023 Directive imposing such obligations will apply. 

Areas of focus for firms

Ahead of the obligations coming into effect, firms will need to consider their existing standard contractual terms in order to assess the extent to which they already meet the information and withdrawal rights requirements. Firms will also need to consider the extent to which their obligations under the 2023 Directive are already met through compliance with sector-specific legislation (such as MiFID II or applicable payments legislation).

Certain concepts in the 2023 Directive may warrant particular consideration. As an example, where an FS distance contract involves an initial service agreement followed by successive operations or separate operations of the same nature, the rights described above will only apply to the initial agreement. Therefore, firms will need to consider the structure of their services in order to determine the extent to which they are comprised of an initial agreement and successive / subsequent operations (to which the rights described above will apply only once) or a series of distinct agreements (in which case the rights will apply to each agreement). Whilst the concepts of “successive operations” or “separate operations of the same nature” are not new under the 2023 Directive, the introduction of additional obligations makes this a valuable juncture to reconsider how they apply to firms’ contractual frameworks. 

Timing and next steps

The deadline for transposing the 2023 Directive is 19 December 2025, although draft transposing legislation still needs to be finalised in a number of jurisdictions. Therefore, the extent to which Member States goldplate the requirements in the 2023 Directive remains to be seen. 

Once transposed, the obligations set out in the 2023 Directive will apply from 19 June 2026 onwards.