What should the final distance marketing of consumer financial services rules look like?

28 April 2023

Position paper

As the DMFSD enters the crucial trilogue stage of the ordinary legislative process, Finance Watch highlights key policies co-legislators should adopt in the final legislative text. Robust and effective consumer protection rules in the online financial services market are more important than ever given increasing digitalization and the emergence of innovative and complex financial services products on the market.

The review of the Distance Marketing of Consumer Financial Services Directive (DMFSD) is now entering the trilogue Negotiations between the institutions on legislative proposals that generally take the form of tripartite meetings between Parliament, the Council and the Commission negotiation stage of the legislative process.

In May 2022, the Commission issued legislative proposals reforming the DMFSD. The Council and the European Parliament’s Committee on Internal Market and Consumer Protection (IMCO) have since published their respective positions on the file.

Following an in-depth review of the final Council and European Parliament texts, Finance Watch has drafted a position paper with policy recommendations for the trilogues. The following key policy provisions should be incorporated in the final legislative text for the DMFSD review:

  • There is a need for regulation of online interfaces (dark patterns) in the DMFSD to ensure that consumers are adequately protected against these malpractices.
  • There is a need for binding regulatory rules for social media influencer promotions, and a ban for such promotions of risky investment products.
  • There is a need for strong rules on penalties for non-compliance with the DMFSD rules to ensure that there is better compliance with the new rules than was the case with the old rules.
  • The final legislative text needs to include a requirement for advertising of consumer credits and retail investment products sold online to include clear and prominent risk warnings as proposed by the European Parliament.
  • The final revised DMFSD rules need to maintain the possibility for Member States to go beyond the DMFSD requirements with regards to pre-contractual information to prevent a watering down of consumer protection in those Member States where national rules are more stringent.
  • It is important that the original scope of the DMFSD is preserved, including the application of the DMFSD when existing product-specific legislation does not cover, or does not cover sufficiently, the rules established by the DMFSD.

Please note that this list is not exhaustive and that a full list of policy recommendations can be found in the PDF document below.

Position paper: