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The European Banking Federation (EBF) has said the Payment Service Directive (PSD) should prevail over new online consumer protection rules and that legislators must ensure they do not create unnecessary friction in the consumer journey.
On December, 21 the EBF released a statement on the EU’s proposal for the review of the EU’s consumer protection rules for the online financial services market.
The Distance Marketing of Financial Services Directive (DMFSD) aims to create a common framework for the cross-border market for financial services, including payments, and provide a high level of protection when consumers sign a contract with a retail financial services provider online or via the phone.
The need for the review of the 20-year-old directive arose from increasing digitalisation and the accelerated shift online during the pandemic, which brought new challenges and risks for consumers.
In May, the European Commission set out a legislative proposal, which is currently under discussion within the Council and European Parliament.
The proposal includes a number of new consumer rights, such as the right to speak to a person rather than a chatbot, and that key information is made available for the consumer one day before signing a contract.
The proposed rules also prohibit dark patterns that can hinder consumers from making an informed choice and require businesses to display an easy withdrawal button in case the customer changes their mind after the purchase.
The banking association said that it welcomes the proposal, which it considers to be “overall short, simple, agile as well as having a technology-neutral approach”.
However, the association asked lawmakers to consider making a number of clarifications and changes to the proposed rules.
In particular, the banks asked legislators to make sure that in cases where a sectoral directive already exists, and it contains the provisions of the pre-contractual information and right of withdrawal, such as the PSD or the Consumer Credit Directive, it should prevail over the DMFSD.
Therefore, the DMFSD should serve as a “safety net” for consumers when specific legislation does not exist.
The banks’ group also states that the withdrawal button should remain at the initiative of the trader, without being mandatory for the consumer.
According to the federation, the requirement that each online financial services trader should provide a withdrawal button entails high and disproportionate IT costs for all providers, triggering structural and operational changes.
“Moreover, we are sceptical as to the fact that customers may engage and disengage too easily, which would subsequently disrupt the smooth processing of genuine engagements.”
It cautions that this would lead to additional administrative burden as well as IT developments, “the cost of which will be borne eventually by consumers”.
Instead, it recommends the trader provide for online adequate and comprehensive information aimed at ensuring an easy and conscious withdrawal from the contract, which would be in line with the rationale of the European Commission's proposal.
Regarding the measure to provide pre-contractual and contractual information to the consumer at least one day before the contract is made, the EBF said it may lead to obstacles for consumers seeking banking services. For example, causing unnecessary delays for consumers who feel sufficiently informed and are willing to conclude the contract.
“Pre-contractual and contractual information should be provided in a timely manner and in good time, as to preserve the fluidity of the customer journey and not to make the procedures more cumbersome without benefit to the consumer is of utmost importance,” the EBF wrote.
