Distance Marketing of Financial Services Directive (DMD) - Evaluation by the European Commission

Background

The Distance Marketing of Financial Services Directive (Directive 2002/65/EC, DMD) aims at ensuring the free movement of financial services in the single market by harmonising consumer protection rules governing this area. The Directive sets out a list of information concerning the financial service and its provider that the consumer should receive before the distance contract is concluded. It also grants, for certain financial services, a right of withdrawal of 14 days to the consumer. Finally, the Directive bans services and communications from suppliers which are not solicited nor consented by the consumers. The DMD applies to insurance intermediaries when distributing products under an organised distance sales /service provision scheme and exclusively via one or more means of distance communication.

In April 2019, the Commission launched its consultation on the evaluation of the Directive on distance marketing of consumer financial services.

As announced in its roadmap, on this issue, the evaluation will gather evidence regarding the functioning of the DMD in its totality and, in particular, regarding the following aspects:

  • scope of services covered
  • information disclosure
  • right of withdrawal
  • unsolicited services and communications
  • regulatory choices by Member States
  • interplay with product-specific legislation in the field of retail financial services, the e-commerce framework and horizontal consumer protection rules.

The results of the consultation will help the Commission assess the Directive's coherence, effectiveness, efficiency, relevance and EU added value.The consultation consisted of two short questionnaires. One was aimed at the general public, the other to stakeholders such as BIPAR (with questions on relevance, effectiveness, efficiency, coherence with other EU texts including the IDD, etc.)

In its response to the Commission questionnaire, BIPAR explained that BIPAR supports the European Commission’s initiative to carry out an evaluation of the DMD. BIPAR welcomes in particular the Commission’s intention to focus its evaluation on the functioning of the DMD from “a cost/benefit and burden reduction perspective”.

Since the adoption of the DMD in 2002, new sector specific EU rules applying to the distribution of financial/insurance services/products like the Insurance Distribution Directive (IDD) and new horizontal EU rules on consumer protection like the General Data Protection Regulation (GDPR) have been introduced. These new EU rules have introduced new pre-contractual information or disclosure requirements. BIPAR therefore agrees with the Commission's approach to evaluate the interplay of the DMD with these new EU rules, and to avoid any possible duplication in particular for the sake of better consumer protection and legal clarity. Therefore, any revised DMD should only include requirements specific to the distance marketing of consumer financial services/products and focus inter alia, for example, on a better protection of vulnerable consumers.

BIPAR also underlined that the technology-neutral approach of the DMD is completely appropriate and should be maintained. It prevents distortion of competition and does not favour one channel of distribution in particular. Regulation should deliver the same protection regardless of channel and consumers will determine what suits them best. It is important that all consumers receive - be it in a digital or non-digital environment - relevant, clear and meaningful information, so that they can take an informed decision about their insurance products. Lastly, BIPAR added that the principle of proportionality should be introduced in any revised DMD, in particular as its all-encompassing scope covers the entire financial sector, which means that it applies to big firms and SMEs alike.

Next steps

BIPAR will continue to work with the European Commission to help identify areas where the regulatory framework could be improved. The Commission is now expected to publish the conclusions of this evaluation exercise in 2020.


- Published on June 2020 -

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