COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2011/83/EU concerning financial services contracts concluded at a distance and repealing Directive 2002/65/EC
Date: 2022-05-11
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: Internet, approximation of laws, consumer information, contract, distance selling, financial services, provision of services, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 11.5.2022  SWD(2022) 141 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  amending Directive 2011/83/EU concerning financial services contracts concluded at a distance and repealing Directive 2002/65/EC                                   {COM(2022) 204 final} - {SEC(2022) 203 final} - {SWD(2022) 142 final}  
 
 
Table of contents 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ................................................. 3 

1.1.  Objective and scope of this initiative ........................................................................... 5 
Interaction of DMFSD with existing legislation and upcoming initiatives .................. 6 
1.2. 
 Peer-to-peer lending and this initiative ........................................................................ 7 
1.3 

2. 

PROBLEM DEFINITION ...................................................................................................... 8 

2.1.  What are the problems to be addressed by the initiative? ............................................ 8 
2.2.  What are the problem drivers? ................................................................................... 20 
2.3.  How will the problem evolve? ................................................................................... 22 
Intervention logic ....................................................................................................... 24 
2.4. 

3.  WHY SHOULD THE EU ACT? .......................................................................................... 26 

3.1.  Legal basis .................................................................................................................. 26 
3.2.  Subsidiarity: Necessity of EU action .......................................................................... 26 
3.3.  Subsidiarity: Added value of EU action ..................................................................... 27 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ................................................................. 27 

4.1.  General objectives (GOs) ........................................................................................... 27 
4.2.  Specific objectives (SOs) ........................................................................................... 28 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? ...................................................... 28 

5.1.  What is the baseline from which options are assessed? ............................................. 29 
5.2.  Description of the policy options ............................................................................... 30 
5.3.  Options discarded at an early stage ............................................................................ 37 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ............................................. 38 

6.1.  Option 1: Repeal of the Directive and non-regulatory measures ............................... 40 
6.2.  Option 2: Comprehensive revision ............................................................................. 43 
6.3.  Option  3a:  Repeal  and  modernisation  of  relevant  provisions  introduced  in 

horizontal legislation .................................................................................................. 45 

6.4.  Option 3b: Repeal and modernisation of relevant provisions introduced in product-

specific legislation ...................................................................................................... 47 

7.  HOW DO THE OPTIONS COMPARE? .............................................................................. 49 

7.1.  Effectiveness .............................................................................................................. 49 
7.2.  Coherence with other EU legislation and policy objectives ....................................... 50 
7.3.  Efficiency ................................................................................................................... 50 
7.4.  Comparison of options and proportionality ................................................................ 53 

8. 

PREFERRED OPTION ........................................................................................................ 54 

8.1.  Option  3a:  Repeal  and  modernisation  of  relevant  provisions  introduced  in 

horizontal legislation .................................................................................................. 54 
8.2.  REFIT (simplification and improved efficiency) ....................................................... 56 

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9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? ................... 57 

ANNEXES ..................................................................................................................................... 59 

ANNEX 1: PROCEDURAL INFORMATION ............................................................................. 60 

1) 
2) 
3) 
4) 

Lead DG, DEcide Planning/CWP references ............................................................. 60 
Organisation and timing ............................................................................................. 60 
Consultation of the RSB ............................................................................................. 60 
Evidence, sources and quality .................................................................................... 62 

ANNEX 2: STAKEHOLDER CONSULTATION – SYNOPSIS REPORT................................. 64 

Introduction and consultation strategy ....................................................................... 64 
1) 
Consultation activities and tools - types of stakeholders and data collection tools .... 64 
2) 
3) 
Evidence, Sources and quality .................................................................................... 66 
4)  Main stakeholder feedback per consultation activity ................................................. 67 

ANNEX 3: WHO IS AFFECTED AND HOW? ........................................................................... 76 

1) 
2) 
3) 
4) 

Practical implications of the initiative ........................................................................ 76 
Summary of costs and benefits ................................................................................... 76 
Impact on Small & Medium Enterprises (SMEs) ....................................................... 78 
One-in, one-out ........................................................................................................... 79 

ANNEX 4: ANALYTICAL METHODS ...................................................................................... 81 

1) 
2) 

Partial quantification ............................................................................................... 81 
Description of the analytical methods ..................................................................... 89 

ANNEX 5. PROBLEM TREE ....................................................................................................... 98 

ANNEX  6  INTERACTION  OF  DMFSD  WITH  EXISTING  LEGISLATION  AND  ON-

GOING INITIATIVES ......................................................................................................... 99 

ANNEX  7  EXAMPLES  OF  INDUSTRY  MISLEADING  AND  UNFAIR  PRACTICES  AT 

ADVERTISING AND PRE-CONTRACTUAL STAGES ................................................. 103 

ANNEX  8  BACKGROUND  INFORMATION  ON  FINANCIAL  SERVICES  PRODUCTS 

SOLD AT A DISTANCE ................................................................................................... 104 

ANNEX 9 GLOSSARY .......................................................................................................................... 105 

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1.  INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

Directive 2002/65/EC on Distance Marketing of Consumer Financial Services (‘the Directive’ 
or ‘the DMFSD’) aims at ensuring the free movement of financial services in the single market 
by harmonising certain consumer protection rules governing this area. It applies horizontally 
to any present or future service of a banking, credit, insurance, personal pension, investment 
or  payment  nature  contracted  by  means  of  distance  communication  e  (i.e.  without  the 
simultaneous  physical  presence  of  the  supplier  and  the  consumer).  The  Directive  sets  out 
information obligations to be provided to the consumer prior to the conclusion of the distance 
contract  (pre-contractual  information),  grants  for  certain  financial  services  a  right  of 
withdrawal to the consumer, and bans unsolicited services and communications from suppliers. 

The Directive has been subject to a full-fledged Evaluation and the Commission has presented 
its results in a Staff Working Document1. The evaluation examined whether the Directive has 
achieved its objectives and whether it is fit for purpose. It assessed the overall functioning and 
practical application of the Directive as well as its continued relevance in view of market and 
legal developments and the current needs of stakeholders. The main results of the evaluation 
can  be  grouped  in  two  overarching  conclusions:  following  the  entry  into  application  of  the 
Directive,  a  number  of  EU  product-specific  legislative  acts  (e.g.  the  Consumer  Credit 
Directive2) and EU horizontal legislation (the General Data Protection Regulation3) have been 
enacted. The impact of these more recently enacted pieces of legislation is that the Directive’s 
relevance and added value has been subsequently eroded. Secondly, in those areas in which the 
Directive  is  still  relevant,  a  number  of  developments  (e.g.  digitalisation)  have  impacted  its 
effectiveness.  

In this light, in the New Consumer Agenda4, the Commission stated its intention to prepare a 
proposal  for  the  revision  of  the  Directive  in  order  to  reinforce  consumer  protection  in  the 
context of the digitalisation of retail financial services. The Council Conclusions on the New 
Consumer  Agenda5  support  the  Commission’s  intention  to  revise  the  Directive,  in 
particular with a view to strengthening consumer protection by implementing specific measures 
preventing  consumer  misinformation.  The  European  Parliament6,  through  different 
legislative  initiative  resolutions,  such  as  the  resolution  of  20  October  2020  with 
recommendations to the Commission on a “Digital Services Act: adapting commercial and civil 

1 European Commission, Commission Staff Working Document Evaluation of Directive 2002/65/EC concerning the 
distance marketing of consumer financial services, SWD (2020) 261 final. 
2  Directive  2008/48/EC  of  the  European  Parliament  and  of  the  Council  of  23 April  2008  on  credit  agreements  for 
consumers and repealing Council Directive 87/102/EEC. 
3 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural 
persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 
95/46/EC. 
4  European  Commission,  2020,  Communication:  New  Consumer  Agenda  Strengthening  consumer  resilience  for 
sustainable recovery, COM/2020/696 final. 
5 Council of the European Union, 2021, Council conclusions on the New Consumer Agenda, p. 7. 
6 European Parliament, Briefing, New consumer agenda, available online at: 
https://www.europarl.europa.eu/RegData/etudes/BRIE/2021/679079/EPRS_BRI(2021)679079_EN.pdf. 

3 

 
                                                           
law rules for commercial entities operating online”7, has called on the Commission to introduce 
new measures in areas in which the Directive still has value (e.g. transparency provisions and 
digital  nudging).  The  Directive  has  been  included  in  the  REFIT  annex  of  the  2020 
Commission Work Programme, with a potential new legislative proposal depending on the 
outcome of the Evaluation and this Impact Assessment.8 

Under  the  President’s  Political  Priorities  of  ‘A  Europe  Fit  for  the  Digital  Age’  and  ‘An 
Economy that Works for the People’, the Commission has launched a variety of political and 
legislative  actions  (e.g.  a  Digital  finance  package9,  the  Capital  markets  union  2020  Action 
Plan10, the ongoing Retail Investment Strategy11) which have directly or indirectly impacted 
the Directive.  

Alongside the different Commission political and legislative actions, over the past twenty years 
distance  marketing  of  consumer  financial  services  has  changed  rapidly.  Financial 
providers and consumers have abandoned the fax machine,  mentioned in  the Directive, and 
since then new players with new business models have emerged, such as fintech which also 
includes technological developments in sectors such as insurance . The total transaction value 
growth of the Fintech sector12in Europe has been increasing on a  yearly basis since 201713.   
Consumers  have  more  confidence  in  buying  through  digital  tools14  and  are  increasingly 
purchasing financial  products  and services online, leading established players  to  adapt  their 
marketing  and  business  practices.  At  the  end  of  2020,  57%  of  EU  consumers  were  using 
banking apps or banking mobile site15.  The impact of the COVID-19 pandemic and the related 
lockdowns has accelerated the use of online shopping in general16. This trend has also been 
noted in the recent European Banking Authority Report17 with regards to financial services and 

See 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12755-Retail-Investment-

7  European Parliament resolution of 20 October 2020 with recommendations to the Commission on the Digital Services 
Act: Improving the functioning of the Single Market (available at https://www.europarl.europa.eu/doceo/document/TA-
9-2020-0272_EN.html) also contains points of interest for the purpose of this Impact Assessment. 
8 See Annexes to Adjusted Commission Work Programme 2020. 
9 See https://ec.europa.eu/info/publications/200924-digital-finance-proposals_en  
10 See https://ec.europa.eu/info/business-economy-euro/growth-and-investment/capital-markets-union/capital-markets-
union-2020-action-plan_en  
11 
Strategy/public-consultation_en  
12  Statista  (2021).  Total  transaction  value  in  EUR  in  Fintech  sector  (EU  27  Member  States).  Available  at: 
https://www.statista.com/outlook/dmo/fintech/eu-27 
13 London Economics Europe, VVA Consulting, Ipsos NV, ConPolicy and Time.lex (‘LE et al.’), 2019,  Behavioural 
study  on  the  digitalisation  of  the  marketing  and  distance  selling  of  retail  financial  services.  Available  at: 
ec.europa.eu/info/sites/default/files/live_work_travel_in_the_eu/consumers/digitalisation_of_financial_services_-
_main_report.pdf. https://www.statista.com/outlook/dmo/fintech/europe#transaction-value was also consulted. 
14  Consumer  Conditions  Survey:  Consumers 
https://public.tableau.com/views/ConsumerConditionsSurvey/S3_D5?%3AshowVizHome=no  
15 Consumer Conditions Survey: Consumers at home in the single market – 2021 edition - Key highlights 
16 See Eurostat, Online shopping ever more popular in 2020, available at: https://ec.europa.eu/eurostat/web/products-
eurostat-news/-/ddn-20210217-1. According to Eurostat, online shopping increased by 4 percentage points compared 
with 2019 (68% of internet users) and by 10 percentage points compared with 2015 (62%) 
17 European Banking Authority, September 2021, The use of digital platforms in the EU’s banking and payments sector, 
available 
at: 
https://www.eba.europa.eu/sites/default/documents/files/document_library/News%20and%20Press/Communication%
20materials/Factsheets/1019866/Use%20of%20digital%20platforms%20in%20the%20EU%20banking%20sector.pdf.  

single  market  –  2021 

at  home 

edition: 

the 

in 

4 

 
                                                           
Eurostat data states that 12% of EU citizens have purchased at least one financial service 
online in 202018. 

1.1. Objective and scope of this initiative 

The  Evaluation  concluded  that  the  Directive  has  been  partially  effective  in  increasing 
consumer  protection  but  of  limited  effectiveness  in  consolidating  the  single  market  due  to 
barriers that are beyond its remit. In addition, needs originally addressed by the Directive 
are currently addressed by other EU legislation that significantly overlap with it. According 
to the Evaluation, 15-28 million EU consumers have benefited from key Directive provisions 
since its transposition in 2004, chiefly in the context of payment accounts, insurance and - to a 
lesser extent – pensions and consumer loans. 

The  initial  objective  of  this  initiative  was  to  gather  and  analyse  the  coherence  of  the 
Directive vis-à-vis the other overlapping EU legislation. To do so, a mapping exercise of the 
relevant  EU  product  and  EU  specific  legislation  was  conducted19  to  see  whether  all  the 
relevant parts of the Directive have been taken over by the more recent EU legislation. 
The initiative looked into whether the Directive could be safely repealed without creating any 
legal  lacunae  and  without  lowering  the  level  of  consumer  protection,  whilst  ensuring  the 
fostering of the single market for cross-border sale of financial products and services sold at a 
distance. The aim of this initiative was to simplify the current legislative framework, either 
by repealing it, or safeguarding only those parts that are still relevant and might be relevant in 
the future. 

As  a  second  step,  after  analysing  the  coherence  of  the  Directive,  the  initiative  aim  was  to 
consider whether the residual ‘legally relevant’ parts of the Directive are still practically 
relevant (effective) for the stakeholders. In other words, the aim of this second step was to 
see whether the still relevant elements of the Directive played a significant role in terms 
of  consumer  protection  and  consolidation  of  the  single  market,  especially  in  light  of 
digitalisation. 

In  this  second  step,  the  Directive’s  safety  net  feature  was  also  analysed.  The  safety  net 
means that the rules of the Directive apply whenever (i) a new product appears on the market 
for which there is no EU legislation yet (e.g. virtual currencies are a financial service product 
not yet subject to legislation at EU level), (ii) the product-specific legislation does not provide 
the right(s) established by the Directive (e.g. the right for the consumer to withdraw from the 
contract  within  an  established  time-period  is  not  laid  down  in  the  relevant  insurance 
legislations),  (iii)  the  product-specific  legislation  creates  exemptions  and  the  product  falls 
outside the scope of application (e.g. consumer credit loans below EUR 200 are not covered 
by Directive 2008/48/EC - Consumer Credit Directive).  

It is important to keep in mind that the Directive defines financial service in a wide manner, 
encompassing any banking, credit, insurance, personal pension, investment or payment service. 
Thus, the Directive captures traditional products such as a life insurance policy or the opening 
of a bank account but also recently emerged products such as cryptocurrencies or consumers 

18 See https://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do. 
19 See Annex 6 (Interaction of the DMFSD with existing legislation and on-going initiatives). 

5 

 
                                                           
taking  out  a  loan  from  a  crowdfunding  platform.  Based  on  the  survey  conducted  for  the 
Evaluation Study the most popular product purchased in the last 5 years by distance means 
was  in  the  insurance  sector  (31%)  followed  by  consumer  loans  (27%)  and  payment 
accounts  (15%)20.  It  must  be  kept  in  mind  that  the  Directive  applies  only  whenever  the 
financial  service  is  bought  at  a  distance,  meaning  that  there  is  no  simultaneous  physical 
presence  of  the  consumer  and  the  supplier.  On  the  basis  of  the  survey  conducted  for  the 
Evaluation Study, more than 60 % of the respondents mentioned that they used online or 
email to buy a financial service; 26% concluded the distance contract via phone. 

1.2. Interaction of DMFSD with existing legislation and upcoming initiatives 

Within the EU legislative framework concerning financial products and services, the Directive 
acts as a lex generalis. Thus, the rules established by the Directive apply horizontally to any 
service of banking, credit, insurance, personal pension, investment or payment nature sold at 
distance.  However,  in  case  there  is  a  sector-specific  legislation  in  one  of  the  mentioned 
financial services which establishes rules similar to or more extensive than those laid down in 
the Directive, the former (i.e. the sector-specific legislation) will apply (lex specialis).  

The Directive entered into application in 2002 and was intended to cover the gap resulting from 
Directive 97/7/EC on the protection of consumers in respect of distance contracts21, since the 
latter excluded from its scope financial services. Directive 97/7/EC, which has in the meantime 
be  repealed  and  replaced  by  Directive  2011/83/EU  on  consumer  rights22  (hereafter  ‘the 
Consumer  Rights  Directive’),  and  the  DMFSD  share  a  lot  of  similarities  in  that  they  both 
provide consumers with basic consumer rights, such as the right of withdrawal and the right to 
obtain  pre-contractual  information.  In  this  light,  while  the  current  version  of  the  Consumer 
Rights Directive excludes from its scope financial services, the Consumer Rights Directive, in 
particular  the  provisions  concerning  distance  contracts,  and  the  DMFSD  bear  a  number  of 
similarities. 

When  the  Directive  entered  into  application,  the  legislative  landscape  concerning  rules  on 
financial services sold at a distance was sparse, meaning that the scope of application of the 
Directive’s rules was vast. However, over the years, a large number of EU legislative acts 
have entered into application. At least fourteen (14) product-specific legislation have been 
enacted  in  the  different  sectors  of  financial  service  and  at  least  five  (5)  horizontal 
legislations have had a direct pact on the Directive (See Table 24 in Annex 6). In addition, 
the  Commission  continues  to  publish  legislative  proposals  which  impact  directly  or 
indirectly the Directive23. 

A  closer  look  concerning  coherence  between  the  Directive  and  relevant  EU  acts  and  the 
resulting problems is provided in Section 2.1. However, the current legislation and proposed 

20 See Annex 8 Background information on financial services products bought at a distance. 
21 Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in 
respect of distance contracts - OJ L 144, 4.6.1997, p. 19 
22  Directive  2011/83/EU  of  the  European  Parliament  and  of  the  Council  of  25  October  2011  on  consumer  rights, 
amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and 
repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council - OJ L 
304, 22.11.2011, p. 64. 
23 For instance, the Commission published, in June 2021, a legislative proposal in the area of consumer credit23 and, in 
September 2021, a legislative proposal in the area of insurance23. 

6 

 
                                                           
amendments  to  the  EU  legislative  framework  point  towards  the  need  to  study  the  concrete 
impact  of  these  changes  to  the  Directive,  including  the  coherence  between  the  different 
legislations and the remaining relevance, if any, for the Directive. 

By way of example, in 2008, thus 6 years after the entry into application of the Directive, the 
Consumer Credit Directive (CCD) entered into force. The CCD established rules in the area of 
pre-contractual information and the right of withdrawal for those products (consumer loans) 
that fall within its scope. Thus, whenever the product falls under the scope of CCD, the rules 
of the CCD apply and not the rules of the DMFSD on pre-contractual information and the right 
of withdrawal. However, the CCD has a number of exemptions (e.g. loans below EUR 200 or 
above EUR 75 000). For those exempted products, the rules of the DMFSD apply. However, 
it has to be kept in mind that the CCD is under revision and a number of currently exempted 
products from the CCD might eventually fall under its scope, rather than the DMFSD, in  a 
couple of years. 

1.3 Peer-to-peer lending and this initiative 

The Explanatory Memorandum of the recent Proposal for a new Directive on consumer credit24 
refers to the protection of consumers granting credit through peer-to-peer lending platforms. In 
this context, it states that ‘the protection of consumers investing through these platforms, and 
the  responsibilities  of  the  platforms  towards  these  consumers  will  be  assessed  in  another 
context’. A preliminary assessment of these issues has, therefore, been carried out in the context 
of the present initiative, in particular since the Crowdfunding Regulation25, in Article 1(2)(a) 
excludes from its scope ‘project owners that are consumers’. A set of questions were submitted 
to stakeholders. While the protection of consumers granting credit through peer-to-peer lending 
platforms is not addressed by this initiative since this issue is too specific to fit the logic of the 
proposal and the horizontal nature of the Directive (the Directive captures all financial services, 
irrespective  of  the  particular  products  or  services),  a  number  of  preliminary  findings  have 
emerged. In general, national consumer authorities rarely, if ever, receive complaints in this 
area26. However,interviewed respondents suggest that natural persons making funds available 
for  consumer  credit  via  peer-to-peer  platforms,  such  as  crowdfunding  platforms,  might  be 
insufficiently protected against misconduct. Hence, it was noted that complaints are more often 
received from consumers providing the funding, rather than the borrowers. In a majority of the 
respondents’  Member  States,  there  is  currently  no  regulatory  or  effective  supervisory 
framework to protect natural persons acting as lenders on such peer-to-peer lending platforms 
as such activity often falls outside the regulatory perimeter, or the application of the existing 

24 Proposal for a Directive of the European Parliament and of the Council on consumer credits COM/2021/347 final. 
25 Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7  October 2020 on European 
crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 
2019/1937, OJ L 347, 20.10.2020 

26 From the survey ran by the contractor in the context of the stakeholder consultations, 14 out of the 26 national 
authorities that replied were competent to deal with this issue. Out of these 14, ‘6’ authorities never received 
a complaint in this area, ‘4’ replied ‘rarely’ while ‘4’ competent authorities replied that they do ‘sometimes’ 
deal with consumer complaints on crowdfunding issues. 

7 

 
                                                           
rules  may  be  unclear.  Interviewees  agreed  that  disclosure  requirements,  such  as  simplified 
disclosure of credit agreement terms or borrower’s risks, and a duty of care clause could be 
appropriate. Some respondents argued in favour of other safeguards, such as caps on amounts 
that can be made available for consumer credit on such platforms by natural persons. Others 
also supported rules for secondary markets in claims. 

2.  PROBLEM DEFINITION 

2.1. What are the problems to be addressed by the initiative? 

Problem 1 concerns the current framework of the Directive. The key question under Problem 
1 is to understand the scale of the problem as a result of the substantial developments in the 
EU legislative framework: considering its lex generalis nature and all the subsequent post-2002 
legislation, does it still have a meaning to exist (relevance) in its current format? How does the 
Directive interact (coherence) with the more modern EU legislation? What are the problems 
created by this lack of coherence and decreased relevance? 

After examining the problems concerning the legislative framework (Problem 1), Problem 2 
and Problem 3 concern those financial services for which parts of the Directive are still legally 
relevant. Thus, Problem 2 and Problem 3 concern only those parts of the Directive (i.e. those 
rules) that apply to certain financial services/products for which currently no sector specific 
legislation exist (e.g. currently no specific legislation in force on virtual currencies), the sector 
specific legislation whose rules do not cover the rules established by the DMFSD (e.g. right of 
withdrawal for certain insurance products) or whose sector specific legislation exempts certain 
products due to limitations to the scope of application (e.g. consumer loans below EUR 200 
are exempted from the Consumer Credit Directive; thus the rules of the DMFSD would apply). 

As depicted in Annex 5, three overarching problems have been identified, each propelled by 
three types of drivers: a regulatory framework that fails to ensure legal certainty (problem 
driver 1), behavioural biases that are exploited by financial providers (problem driver 2), and 
barriers that hamper the possible increase of cross-border provision of financial products.  

In  turn,  Problem  1,  Problem  2  and  Problem  3  translate  into  consequences  for  consumers 
(detriment in case the product they bought is unsatisfactory, lack of sufficient trust to contract 
a financial service, both in home Member State and/or cross-border, and hence loss of welfare), 
and businesses (uneven playing field, compliance costs and loss of welfare due to the lack of 
realization of the potential of the internal market). 

2.1.1.  Problem 1: Lack of coherence and decreased relevance of the DMFSD due 

to overlap with product-specific and horizontal legislation   

As indicated in Annex 6, since 2002, the EU has been active in the area of financial services, 
adopting a large number of legislative acts. At the time of writing this impact assessment, there 
are  two  ongoing  legislative  proposals  (Revision  of  the  Consumer  Credit  Directive27  and  a 

27 COM(2021) 581 final, 2021/0295(COD). 

8 

 
 
                                                           
Proposal for a Regulation on Markets in Crypto-assets28) and prospective revisions (e.g. to the 
Mortgage Credit Directive29, on-going work in the area of Retail Investment30) which are likely 
to have a direct impact on the legislative framework of the DMFSD. The legislative framework 
of the DMFSD is a moving target, as its relevance and coherence is linked to the adoption of 
new legislation. In this light, the scale of this issue is described in the Table 1. 

Table 1. Legal Mapping of the Directive and overlaps with product specific legislation 

Pre-contractual information 

Right of withdrawal 

Ban on unsolicited 
service 

Banking products 

Right of withdrawal on payment 
accounts 

Fully relevant 

Savings accounts 

Consumer Credits  Consumer  credits  below  EUR 

200 and above EUR 75,000 

Mortgages 

Mortgages  for  Member  States  
that opted to give this right under 
DMFSD  and  not  Mortgage 
Credit Directive 

Insurances 

Information  on 
withdrawal 
for 
covered by that right 

the  right  of 
investments 

Consumer  credits  below 
EUR 200 and above EUR 
75,000 

Mortgages  for  Member 
States    that  opted  to  give 
this  right  under  DMFSD 
and  not  Mortgage  Credit 
Directive 

Investments  covered  by 
article 6 of DMFSD 

Personal pensions 

Fully relevant 

Fully relevant 

Investments 

Information  on 
withdrawal 
for 
covered by that right 

the  right  of 
investments 

Investments  covered  by 
article 6 of DMFSD 

Payment services  Mostly non-relevant 

Mostly non-relevant 

Article 9 of the DMFSD 
was amended by Unfair 
Commercial Practices 
Directive 

The table illustrates the seven (7) areas that fall under the definition of ‘financial services’ and 
represents the regulatory links (legal framework) between the Directive and these 7 areas with 
regard to the three basic consumer rights established in the DMFSD. The red colour signifies 
that  the  articles  of  the  Directive  are  no  longer  relevant.  Orange  signifies  that  the  product 
specific  legislation  is  currently  under  review  and  the  possibility  of  the  Directive  still  being 
relevant is put into question. Green signifies that, from a regulatory point of view, the Directive 
is still relevant. 

28 Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending 
Directive (EU) 2019/1937. 
29  See:  https://ec.europa.eu/info/business-economy-euro/banking-and-finance/consumer-finance-and-payments/retail-
financial-services/credit/mortgage-credit_en. 
30 
Strategy/public-consultation_en. 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12755-Retail-Investment-

See: 

9 

 
 
 
 
                                                           
Ban on unsolicited services and communication 

Out of the three rights provided by the DMFSD, the articles concerning the ban on unsolicited 
services and communication are nowadays irrelevant. With regard to the ban on unsolicited 
communication, the e-Privacy Directive31 and the General Data Protection Regulation32 apply 
horizontally, thus also covering unsolicited communication in the area of financial services. 
With regard to the ban on unsolicited services, the Unfair Commercial Practices Directive33 
implemented in 2007 addressed this aspect and explicitly amended Article 9 of the DMFSD.  

Right to obtain pre-contractual information  

Most  of  the  product-specific  legislation  adopted  after  2002  in  the  area  of  financial  services 
have  imposed  the  obligation  on  financial  service  providers  to  supply  pre-contractual 
information  to  consumers.  The  content  of  information  to  be  provided  to  consumers  varies, 
depending on the specific EU legislation in question. 

First,  the  overlap  between  the  DMFSD  and  the  product  specific  legislation  means  that  the 
relevance of the DMFSD articles on pre-contractual information are limited to those financial 
products which are exempted from the product-specific legislation since in case of over-
lap the applicable rules are those laid down in the product-specific legislation For instance, 
“buy  now  pay  later”  consumer  loans  of  less  than  EUR  200  do  not  currently  fall  under  the 
current Consumer Credit Directive. Thus, the obligations for financial providers to provide pre-
contractual information in that case stems from the DMFSD. The DMFSD articles would also 
apply to those financial services products for which no product-specific legislation is currently 
in force, such as cryptocurrencies34.  

Second,  the  overlap  between  the  Directive  and  the  product-specific  legislation  has  led  to 
practical issues. Both in the stakeholder consultation related to the Evaluation Study and in the 
Public Consultation related to this Initiative, stakeholders in the insurance sector pointed out 
that this overlap has led insurance providers to present two sets of pre-contractual information 
documents, one stemming from the insurance specific legislations and one stemming from the 
DMFSD. This amounts to unnecessary financial cost for the providers but also detrimental for 
consumers who, in this manner, suffer from information overload35.  

31 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of 
personal data and the protection of privacy in the electronic communications sector. 
32 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural 
persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 
95/46/EC. 
33 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-
consumer  commercial  practices  in  the  internal  market  and  amending  Council  Directive  84/450/EEC,  Directives 
97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 
of the European Parliament and of the Council. 
34 See footnote 39 concerning a national judgment applying the DMFSD in the area of cryptocurrencies for failure to 
provide adequate pre-contractual information. 
35 16% of business associations, consumer associations and national authorities participating in the Evaluation study 
survey were of the opinion that the existing overlaps between the DMFSD and the product-specific legislation in the 
consumer credit loans sector were unjustified. The figure stood at 14% in regard to respondents who believe that the 
overlaps between the DMFSD and the product-specific legislation in the mortgage sector were unjustified. 

10 

 
                                                           
Right to withdrawal 

While most product-specific legislation have introduced the right to obtain pre-contractual 
information,  not  all  have  included  the  right  of  withdrawal.  For  instance,  in  the  banking 
sector,  the  Payment  Accounts  Directive  (PAD)36,  while  providing  extensive  pre-contractual 
information obligations, does not establish the right to withdraw. Thus, the right of withdrawal 
in instances of a banking account bought at a distance, stems from the DMFSD. 
The DMFSD articles would also apply to those financial services products bought at a distance 
for which no product-specific legislation is currently in force, 

Scale of the Problem & the Safety Net feature of the Directive 

In  light  of  the  Table  24,  Figure  3  and  Figure  4  found  in  Annex  6,  it is  safe  to  say  that  the 
regulatory relevance of the DMFSD has been in a constant state of decline caused by post-
2002  EU  legislation.  In  addition,  the  scale  of  this  problem  appears  to  be  growing  since, 
excluding the Proposal to Revise Solvency II37, the current European Commission proposals 
in different financial services overlap and reduce further the DMFSD’s relevance. 

The proposal concerning the Revision of the Consumer Credit Directive intends to widen 
the scope to consumer loans below EUR 200 and above EUR 75 000. The proposal for a 
Regulation on Markets in Crypto-assets will regulate an area which is currently subject to no 
specific  regulation  and  hence,  would  fall  under  the  DMFSD.  These  instances,  just  like  the 
recently adopted Crowdfunding Regulation38, illustrate that the DMFSD is further losing its 
relevance vis-à-vis different financial products. 

The lack of relevance of the DMFSD is also illustrated by the fact that it refers, in its recitals 
and in the operative part, to largely out-dated technologies, such as fax machines, floppy discs, 
CD-ROMs, DVDs. 

The problem linked to the relevance of the DMFSD is further exacerbated by the fact that the 
provision  regulating  the  relationship  between  the  DMFSD  and  the  product-specific 
legislation  is  unclear.  First  of  all,  the  hierarchical  norm  setting  out  which  legal  provision 
should apply is not laid down in the text. When the DMFSD does refer to the lex generalis/lex 
specialis relationship, it concerns only the right for pre-contractual information. In addition, as 
explained above this is still not sufficiently clear for certain financial providers, in particular in 
the insurance sector, since, to be on the safe side, they provide two sets of pre-contractual 
information documents to the consumer. 

In  addition,  in  the Public Consultation,  national authorities and industry  stakeholders stated 
that  certain  definitions  and  concepts  of  the  DMFSD  require  further  clarification,  in 
particular  ‘fully  completed  performance’  under  Article  6(2)(c)  and  ‘concluded  at  the 
consumer’s request’ under Article 5(2) of the DMFSD.  

36 Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees 
related to payment accounts, payment account switching and access to payment accounts with basic features. 
37 In the Proposal, the European Commission proposes to exclude small insurance firms from the scope of application 
of  Solvency  II,  thus  meaning  that,  if  these  excluded  insurance  firms  provide  insurance  products  at  a  distance,  the 
DMFSD would apply. 
38  Regulation  (EU)  2020/1503  of  the  European  Parliament  and  of  the  Council  of  7  October  2020  on  European 
crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937. 

11 

 
                                                           
The view that the current DMFSD regulatory framework is losing its relevance is shared 
by  all  stakeholders.  While  they  disagree  on  how  to  solve  the  problem,  the  erosion  of  the 
relevance of the DMFSD is a given-fact. 

However, more than 70% of stakeholders from all groups also agree that, while the relevance 
of the DMFSD has been reduced, the safety net feature as a result of the horizontal scope 
of the Directive renders the DMFSD effective.  

Different stakeholders have provided different examples of the use of the safety net feature 
of  the  DMFSD.  Financial  providers  explained  that  they  reverted  back  to  the  DMFSD 
provisions when they were in doubt as to which legislation applies to cryptocurrencies. Another 
example, cited by both financial providers and public authorities, concerned the use of digital 
on-boarding. Due to the lockdowns related to the COVID-19 pandemic, instances of physical 
meetings in banks between consumers and providers was kept to a minimal. Thus, digital on-
boarding of potential clients took place on a more regular basis. In such instances, financial 
providers, upon seeking the views of the relevant competent authorities, applied the DMFSD 
since the contract was being concluded ‘at a distance’. Public authorities have also cited other 
instances when they use the DMFSD, such as in the area of investment in expensive wines 
and diamonds, or certain  gift-cards that fall outside the scope of PSD  II, or current  loans 
below EUR 200 that fall outside the Consumer Credit Directive.  

With  regard  to  the  consumer  loan  sector,  the  scientific  researcher  and  most  consumer 
organisations  participating  in  the  Public  consultation  noted  that  most  of  the  dangerous 
products for consumers on the market, such as buy now pay later loans below EUR 200, 
appeared  on  the  market  thanks  to  digitalisation  only  after  the  entry  into  force  of  the 
Consumer  Credit  Directive.  Thus,  it  is  the  DMFSD,  rather  than  the  Consumer  Credit 
Directive,  that  provides,  until  the  latter  in  revised,  consumers  with  a  minimum  level  of 
protection,  in  terms  of  pre-contractual  information  and  a  right  of  withdrawal.  It  was  also 
highlighted  that  the  emergence  of  new  products  brought  by  digitalisation  outpace  the 
required time for the EU to legislate. In this regard, the safety net in the DMFSD has been 
used to cover instances not foreseen by the product-specific legislation at the time of entering 
into force. The safety net feature of the DMFSD has also been applied by the national courts39 
vis-à-vis  still  unregulated  products  (e.g.  crypocurrencies).  The  scientific  researcher  and 
consumer  organisations  who  participated  in  the  public  consultation  noted  that  financial 
products in the digital sphere tend to be complex for the average consumer to understand. Thus, 
the safety net feature of the DMFSD provides the minimum ex ante and ex post protection for 
the consumer whilst also providing the necessary trust to contract such innovative products 

Public  authorities  cited  the  usefulness  of  the  DMFSD  as  a  catch-all  instrument  during 
investigations.  Thus,  for  the  same  investigation,  they  cite  and  apply  rules  from  both  the 
product-specific  legislation  and  the  DMFSD.  Nearly  half  of  the  financial  service  providers 
replying  to  the  inception  impact  assessment  highlighted  the  importance  of  the  safety  net. 
Industry representatives in the area of insurance and all consumer organisations point out that 

Verona 

39 
https://www.dirittobancario.it/sites/default/files/allegati/tribunale_di_verona_24_gennaio_2017_n._195.pdf. 

Decision 

January 

Court, 

n°195 

2017, 

available 

24 

of 

at: 

12 

 
                                                           
the safety net feature has, over the years, helped build consumer trust, especially since the 
right  of  withdrawal  in  the  area  of  insurance  stems  in  fact  from  the  DMFSD.  In  addition,  a 
number of EU based industry representatives noted that the safety net ensured a level playing 
field and cited the on-going entry into the financial services market by Bigtech companies40. 
For instance, Amazon is active in different areas of financial services and might, in the near 
future,  develop  products  that  do  not  fall  under  any  product-specific  legislation.  Thus,  the 
DMFSD would capture such products. The provision of financial services by Bigtechs has been 
on the Commission’s radar for a number of  years41. Over the  years, Bigtechs, through their 
business models, have been able to process vast numbers of personal data processing activities 
and have deployed state-of-the art technological tools. As referred in the EU Digital Strategy 
‘these developments are changing the nature of risks to consumers, users and financial stability 
and they may also have a significant impact on competition in financial services’. In this light, 
it is worth recalling that the DMFSD is without prejudice to Regulation 2016/679 (the General 
Data Protection Regulation). Thus, the processing of personal data by Bigtechs falls under the 
scope of Regulation 2016/679, which already establishes rules and principles such as purpose 
limitation and data minimisation. However, with Bigtechs increasing their offers to consumer 
to buy financial services, both legislations can contribute to ensure that the consumer’s personal 
data is safeguarded and that all financial service providers are subject to the same rules and 
regulations, thereby ensuring a level playing field.  

2.1.2.  Problem 2: Consumers taking out financial services by means of distance 

communication are not sufficiently protected and face detriment 

As  a  result  of  market,  technological  and  behavioural  developments  that  occurred  after  the 
adoption of the DMFSD, some consumers contracting financial services at a distance are not 
adequately  protected  from  arrangements  that  will  become  unsustainable  for  them.  Ill-suited 
products may cause detriment, such as debt spirals and over-indebtedness. The reasons for the 
lack  of  sufficient  protection  are  multiple,  stemming  both  from  the  consumer’s  behavioural 
actions (e.g. heuristic decision making) and manipulative behaviour by the financial provider. 
This lack of protection causing consumer detriment cuts across the different rights provided by 
the DMFSD. 

Sub-problem  2.1.:  Limited  consumer  awareness  of  key  elements  and  costs  of  some 
financial services (e.g. pre-contractual information does not include how the info needs 
to be presented) 

Consumers may face detriment when purchasing financial services at a distance if they are not 
aware of key features of the services they purchase. In this light, the DMFSD obliges financial 
providers to provide, ‘in good time before the consumer is bound by any distance contract or 

40 See https://www.cbinsights.com/research/report/amazon-across-financial-services-fintech/ 
41 See for instance Communication by the European Commission to the European Parliament, the Council, the 
European Economic and Social Committee and the Committee of the Regions on a Digital Financial Strategy 
for the EU (COM/2020/591 final) 

13 

 
                                                           
offer’, pre-contractual information to the consumer so that the latter is in a position to choose 
the product that serves him best.  

to 

The  Behavioural  Study  on  the  digitalisation  of  the  marketing  and  selling  of  retail  financial 
services highlights that the lack of information provision at the pre-contractual stage42 and 
the  lack  of  time  for  consumers  to  analyse  the  information  provided43  (22%  of  the 
respondents 
the  Evaluation  Public 
Consultation stated that the time allocated 
was insufficient and felt under pressure to 
sign  the  contract,  chart  below),  lead  to  a 
situation  whereby  consumers  do  not 
understand the terms and conditions of 
the financial services they contract.  

Figure  1.  Amount  of  time  to  review  the 
information  about 
the 
provider before having to sign the contract44. 

the  offer  and 

The  reason  for  such  incomprehension  of  key  elements  and  costs  can  be  multiple  and  may 
involve information overload or information complexity by the financial provider. In fact, 
according to a Report of a National Competent Authority45, presenting the costs in a complex 
manner  with  specific  legal  jargon  is  a  way  for  financial  providers  to  ensure  that 
consumers do not fully grasp the information they are provided. This has been recorded in 
particular for the consumer loans market and the savings products market. These two markets 
represent, on the basis of the Evaluation study, 46 % of all sales carried out by distance selling 
in the past five years (Figure 5). 

In this manner, the financial providers comply on paper with their pre-contractual obligations, 
but the aim and spirit of the law is not reached. Likewise, consumer organisations argue, and 
this is also documented in the Behavioural study, that, while the DMFSD obliges the financial 
providers to propose pre-contractual information, its rules neither establish how (‘the form’) 
the information is to be proposed (the DMFSD uses the term ‘clear manner’, but does not 

42 The Study found that mandatory information being omitted at the pre-contractual stage as being “high” prevalence 
for most types of financial products, including various types of credit, travel insurance, savings, current accounts and 
payment services. London Economics Europe, VVA Consulting, Ipsos NV, ConPolicy and Time.lex (‘LE et al.’), 2019, 
Behavioural study on the digitalisation of the marketing and distance selling of retail financial services. Available at: 
ec.europa.eu/info/sites/default/files/live_work_travel_in_the_eu/consumers/digitalisation_of_financial_services_-
_main_report.pdf. 
43  This  has  also  been  confirmed  by  the  Stakeholders  consultation.  Consumer  associations  argued  that  the  timing  of 
disclosure is drafted in a too wide manner, since the DMFSD employs the generic term ‘in good time’, which in practice 
has resulted in the pre-contractual information being presented at the same time as the time of signature. See European 
Commission,  2019,  Evaluation  of  the  Distance  Marketing  of  Consumer  Financial  Services  Directive  (Directive 
2002/65/EC) Summary report – public consultation.  
44  IFC,  2020,  Evaluation  of  Directive  2002/65/EC  on  Distance  Marketing  of  Consumer  Financial  Services,  p.182. 
Available at https://ec.europa.eu/info/sites/default/files/dmfsd_evaluation_final_report_2020.pdf. 
45  Autorité  de  contrôle  prudentiel  et  de  résolution  (ACPR),  2017,  Activity  Report  2016  on  Customer  Protection. 
Available at: https://acpr.banque-france.fr/sites/default/files/media/2017/07/10/acpr-2016-part4.pdf.  

14 

 
                                                           
specify that it should be displayed ‘prominently’) nor does it ensure that the information is 
fit to modern digital tools.46  

The same consumer organisations, in the consultations linked to this initiative, pointed out that 
setting up an obligation on Member States to establish an independent comparison website 
could help consumers at the pre-contractual stage. This idea is borrowed from the Payment 
Accounts  Directive  (2014/92/EU,  ‘PAD’)  which  indeed  establishes  such  an  obligation  on 
Member  States.  Through  this  comparison  website  the  consumer  would  be  able  to  obtain 
information  on  the  payment  accounts  available  on  the  market  and  thus  make  an  informed 
decision. However, the recent PAD Evaluation47 found ‘that comparison websites are at very 
different  levels  of  quality  and  functionality’.  The  Study  noted  that  the  ‘introduction  of  the 
comparison table does not necessarily translate into a feeling of trustworthiness, impartiality 
and transparency’. 

Sub-problem 2.2.: Sub-optimal use of the Right of withdrawal 

The right of withdrawal (Article 6 and 7 DMFSD), aims to provide consumers with a ‘cooling-
off  period’  (of  14  days,  extended  to  30  days  for  life  insurance  contracts)  for  most  of  the 
financial services purchased through distance means of communication. This allows consumers 
time to rethink and reassess the contract, as well as the opportunity to change their minds and 
terminate the contract without penalties for non-performance and without having to provide a 
reason. The right to withdrawal is especially important for financial services marketed sold at 
a  distance,  because  digitalisation  and  the  acceleration  of  decision-making  processes  could 
facilitate making wrong financial choices. From the Evaluation Study48 Public Consultation, it 
emerged that more than 90% of the consulted consumers indicated that having the right 
of  withdrawal  is  important  (for  75%  it  is  very  important),  more  than  85%  of  industry 
stakeholders  consider  it  relevant  and  100%  of  the  national  authorities  consider  it 
relevant. The Evaluation survey notes that up to  13% of the  consumers surveyed  were not 
made aware of their right to withdraw and that up to 20% of the consumers surveyed buying 
an insurance product were not fully informed of the extent of costs/charges associated in case 
that would have exercised their right of withdrawal. Considering that online sale of financial 
services is expected to grow, it is reasonable to expect that the number of EU citizens concerned 
by this sub-optimal use of the right of withdrawal will increase. 

A special 2011 Eurobarometer investigating the extent of consumer empowerment showed that 
consumers’  awareness  of  their  rights  in  respect  of  cooling-off  periods  after  engaging  in  a 
distance purchase tends, in certain market segment, to be low. In the case of car insurance sold 
through  distance  means,  for  example,  more  than  half  of  consumers  do  not  have  a  clear 
understanding  of  their withdrawal  rights,  with  27%  believing  (incorrectly)  that  they  can 
cancel a contract and simply pay an administrative fee, 10% (incorrectly) believing they will 

46 75% of consumer organisations that participated in the interview questionnaire for the supporting study stressed the 
need to render the provision of pre-contractual information fit for the digital devices. 
47  Deloitte,  2020,  Study  on  EU  Payments  Accounts  Market.  Available  at:  https://op.europa.eu/en/publication-detail/-
/publication/0854f727-6117-11eb-8146-01aa75ed71a1/language-en. 
48 European Commission (2019a). 

15 

 
                                                           
not be refunded if they choose to withdraw from a contract, and 18% (incorrectly) believing 
they do not have the right to cancel a contract at all49. This finding is corroborated by data from 
the  Evaluation  Study  and  the  Behavioural  Study  on  the  digitalisation  of  the  marketing  and 
distance selling of retail financial services50. The Behavioural Study found that existence of 
the right of withdrawal was not communicated to 39% of respondents. The Evaluation of 
the DMFSD51 confirmed this result and further shows that 54% did not receive information on 
the conditions for exercising the right to withdrawal. The study found that the problem was 
particularly  prevalent  in  the  money  transfers  market,  where  53%  of  consumers  are  not 
informed on their right to withdrawal. 

Apart from the lack or inadequate informational provision of the right of withdrawal, various 
commercial tactics flagged by desk research  are used by financial providers to  circumvent 
potential revenue losses that can arise from withdrawals. For instance, providers may require 
consumers to make the first payments after the standard 14-day cancellation period has 
elapsed, for example within a month of receiving their contractual agreement. The aim is to 
shift the consumer’s attention away from the timeframe set for cancelling to the timeframe set 
for making a first payment. By then, if the consumer wishes to withdraw, they will have missed 
the opportunity to do so. This practice is often discussed in the context of insurance products 
contracted by phone, where premium payments often begin one month after an agreement is 
sent to the consumer.  

Another tactic is to make the process complex and burdensome which can discourage or 
prevent consumers from using the right. This has been included in the European Banking 
Authority Opinion on the DMFSD52. The question on how and whether the withdrawal was 
done according to the Directive has led, according to desk research conducted by the contractor 
carrying out the Support Study, to litigation before national courts, for instance in Estonia53 
and Germany54.. 

Among the most common complaints in relation to withdrawals from contracts, nearly two 
out of five relate to consumers being subject to hidden charges or fees upon initiating the 
withdrawal process. About one in three consumers describe providers’ miscalculations that 
would  have  shortened  the  withdrawal  time  window  and  potentially  prevented  them  from 
exercising their right to withdraw. 

services 

through  digital  means  under  Directive  2002/65/EC,  p.  8.  Available 

49 See Special Eurobarometer 342 (2011). 
50 LE et al, 2019. 
51 IFC, 2020, p.74.  
52 European Banking Authority (EBA), 2019, Opinion of the European Banking Authority on disclosure to consumers 
of  banking 
at: 
https://www.eba.europa.eu/sites/default/documents/files/document_library/Opinion%20on%20disclosure%20through
%20digital%20means.%20FINAL.pdf. 
53 
County 
https://www.riigiteataja.ee/kohtulahendid/fail.html?fid=231149362 
54 

Bundesgerichtshof,  XI 
http://juris.bundesgerichtshof.de/cgi-
bin/rechtsprechung/document.py?Gericht=bgh&Art=en&nr=86778&pos=0&anz=1;  Bundesgerichtshof,  XI 
http://juris.bundesgerichtshof.de/cgi-
24.01.2017: 
ZR 
bin/rechtsprechung/document.py?Gericht=bgh&Art=en&nr=78004&pos=0&anz=1 

03.07.2018: 

2-17-119750 

9  May 

available 

decision 

183/15 

520/16 

Court, 

2018, 

Tartu 

ZR 

at: 

no 

of 

of 

of 

16 

 
                                                           
In short, the lack of awareness of consumers on the possibility of benefit from the mentioned 
right at the moment of the purchase, the refusal by the provider to accept the withdrawal and 
experience of bureaucratic difficulties faced by consumers while exercising their right lead 
to a sub-optimal use of the right of withdrawal. 

Sub-problem 2.3.: New market practices exploiting patterns in consumer behaviour  

The  Behavioural  study  provides  a  list  of  examples  concerning  new  market  practices. 
Digitalisation has facilitated the emergence of new distribution channels on the market, often 
providing  opportunities  for  financial  providers  to  benefit  from  gaps  in  the  regulatory 
framework.  In  fact,  since  the  DMFSD  does  not  explicitly  define  how  pre-contractual 
information should be presented, providers can engage in practices at advertising and at pre-
contractual stage to nudge consumers into purchasing their services. Such market practices 
come in different ways and means. The Behavioural study provides 5 overarching practices: 
(i) the way in which information is provided (e.g. benefits added while costs hidden or given 
less prominence), (ii) features that may accelerate the decision to buy the product (one-click 
products), (iii) the actual design of the offer (pre-ticked boxes), (iv) consumer targeting and 
personalisation (v) tools made available to consumers to assist their decision-making process). 
These practices  are then further broken down into specific actions taken by providers to exploit 
patterns in consumer behaviour (see Table 25 in Annex 7). In this regard, it is worth noting that 
all the instances mentioned in the table are problematic. For instance, a mystery shopping 
exercise55  in  the  area  of  payment  services  found  that  56%  of  consumers  looking  to 
transfer money experienced hardship in finding information on the terms and conditions. 
The  technique  of  obscuring  information  has  also  been  noted  with  regard  to  the  selling  of 
payment protection insurance (PPI).   

Information on financial services if often complex and difficult to understand for the average 
consumer,  and  especially  for  consumers  in  a  situation  of  vulnerability.  This  is  exacerbated 
when there is no physical contact between the financial service provider and the consumer. 
This  is  why  some  NGOs  and  consumer  organisations  advocate  for  the  creation  of  basic 
necessary financial services with simple standardised features, to avoid financial exclusion.56 

With  regard  to  distorting  consumer  decision-making  through  ways  of  how  information  is 
presented, a study by Invesco57 found that consumers in the pension market are more aware of 
positively framed messages than negatively framed messages. The study showed that 64% of 
consumers  were  more  likely  to  read  a  statement  encouraging  them  to  manage  their 
pension compared to a statement warning them against failing to manage. Considering 
that the DMFSD is still of great relevance in the pension sector, namely that the right of pre-
contractual information and right of withdrawal stem from it, ensuring that consumers receive 
clear and easily comprehensible information is important. 

55 European Commission (2020). 

Invesco, 

57 
defaults, 
2020,  Beyond 
content/uploads/2020/11/Beyond-the-defaults.pdf. 

the 

p. 

24.  Available 

at: 

https://www.nestinsight.org.uk/wp-

17 

 
                                                           
 
With  regard  to  techniques  that  help  accelerate  the  decision  to  buy  a  certain  product,  the 
Behavioural Study58 found that fast purchasing processes (i.e involve two or three clicks) 
led consumers to choose the best loan for them only in 36.09% of the cases.  

With regard to techniques concerning the actual design, the instance of bundling was labelled 
as ‘rather detrimental’ to consumer welfare. The average rating of this practice scored as 
relatively  high  (compared  to  other  practices  covered)  and  above  3,  meaning  that  it  was 
perceived rather detrimental.  

With regard to targeting and personalisation, the Behavioural Study notes that fewer than 
10% of consumers have no concerns whatsoever when they are the target of personalised 
offers. The risk concerning such practices is price discrimination, which may be detrimental 
to the consumer. In addition, a horizontal issue mentioned by consumer organisations linked to 
personalised offers concerns advice provided by robots. Robo-advisors are online platforms 
that  use  artificial  intelligence  or  algorithms  to  process  information  on  clients’  investment 
preferences, risk tolerance and loss-absorption capacity, to determine an investor profile and 
make a personalised and often product-specific investment recommendation59. Better Finance, 
in  their  Annual  Robo-Advice  Report  described,  respectively,  the  issues  concerning 
transparency and suitability offered by robots as ‘disappointing’ and ‘alarming’. The European 
Commission Expert Group on Regulatory Obstacles to Financial Innovation (ROFEIG), in its 
Final Report to the European Commission60, refers to used cases of robo-advice in the financial 
sector (e.g. in brokerage and investment management or in insurance products and services) 
and calls on the Commission to look into this issue.  

2.1.3.  Problem  3:  The  competitiveness  of  the  internal  market  for  financial 
services sold by means of distance communication is not fully achieved due to 
barriers to the provision of financial services across borders 

One  of  the  two  main  objectives  of  the  DMFSD  is  to  foster  cross-border  sales  of  financial 
services. Figures pre-DMFSD illustrated that the lack of EU action in this area led to consumers 
not trusting services from other Member States. According to the Eurobarometer 205 survey61, 
only a small fraction of respondents would consider purchasing a financial product or service 
from  another  EU62.  The  introduction  of  the  provisions  on  pre-contractual  information 
obligations, right to redress, ban on unsolicited services and communication and the right of 
withdrawal in the DMFSD was meant to address consumer concerns and trigger the provision 
of cross-border financial products. 

58 LE et al, 2019. 
59  Better  Fiance,  Robo-Advice  5.0:  Can  Consumers  Trust  Robots?,  December  2020,  available  at: 
https://betterfinance.eu/wp-content/uploads/Robo-Advice-Report-2020-25012021.pdf.  
60  European  Commission,  Expert  Group  on  Regulatory  Obstacles  to  Financial  Innovation  (ROFIEG):  30 
Recommendations  on  Regulation,  Innovation and  Finance  -  Final  Report  to  the  European  Commission  -  December 
2019. 
61 Special Eurobarometer 205.  
62 According to the Eurobarometer survey, 28% of respondents were concerned about not receiving clear or sufficient 
information on the product or service purchased from another EU Member State, 23% expressed a concern about the 
possibility of fraud or crime, 22% were concerned about possible language barriers affecting the purchase of the product 
or service, and 15% believed that there is less consumer protection in other EU Member States. 

18 

 
                                                           
While according to Eurostat’s estimates around 12% of the individuals in the EU have, in 2020, 
purchased  at  least  one  financial  service  online  in  the  previous  3  months,  the  share  of  EU 
citizens making cross border purchases remained relatively low in 2005-2020. According 
to  the  Eurobarometer  surveys,  in  201163  94%  of  respondents  that  had  purchased  financial 
products reported not having purchased these products from another Member State, while in 
201664 this share stood at 92%. According to the Eurobarometer surveys, the most common 
financial service bought  between 2003 and 2016  from  another Member State were  current 
bank accounts (3% in 2016). The other financial services were credit cards, car insurance and 
investment  funds,  shares  or  bonds,  all  with  an  average  1%  of  respondents  reportedly 
contracting at least one of those products from another Member state in 2016. 

The  reasons  for  such  figures  are  the  result  of  a  number  of  barriers  that  consumers  and 
businesses face.  

On  the  consumer-side  perception,  emotional,  cultural  and  language  barriers,  such  as 
consumer  preferences  for  domestic  products,  informational  friction  and  a  lack  of  trust  or 
confidence.65 The lack of confidence may be the result of perceived problems associated with 
cross-border  transactions,  such  as  websites  being  blocked  or  not  being  able  to  finalise  a 
transaction66.  

From the business side, industry stakeholders consulted for the Impact Assessment Support 
Study indicated a number of barriers that are preventing them from offering services cross-
borders, including lack of demand (particularly in the banking industry); providers generally 
prefer serving markets in which they are physically established; entrance costs (for example, 
due to language barriers); different tax regimes and other regulatory barriers such as the lack 
of common rules on services and contracts. 

Differences in the way the DMFSD was transposed at national level due to the regulatory 
choices offered to Member States (e.g. third paragraph of Article 6(1), Article 7(2) DMFSD) 
and  the  lack  of  clarity  on  when  the  DMFSD  applies  and  when  the  product-specific 
legislation  applies  have  also  been  cited  as  barriers  to  cross-border  expansion  by  industry 
stakeholders and public authorities in the stakeholder consultation to this initiative. 

63 Eurobarometer 373 (2011). 
64 Eurobarometer 446 (2016). 
65 The Evaluation’s Public Consultation indicated as main reasons for not contracting financial products beyond their 
border: uncertainty about their rights or where to turn to get redress in case of a problem (about 38%); they are satisfied 
with the services offered in their country (28%); they prefer face-to-face contact (24%); language barriers (15%). 
66  According  to  the  Consumer  survey  prepared  by  the  contractor  for  the  DMFSD  Evaluation,  the  most  common 
experience for those consumers that tried to purchase financial services in another Member State was that they were 
redirected to a website that was specific to the country where they live (29%) or they could not access the website (19%). 
In addition, according to a study of the French-Germany ECC on the European insurance market (Franco-German ECC, 
2014,  Der  europäische  Versicherungsbinnenmarkt,  Grenzüberschreitende  Versicherungsverträge:  Abschluss  oder 
Ausschluss, 
https://www.cec-zev.eu/fileadmin/Media/PDF/publications/Etudes-
Rapports_DE/Studie_Versicherungsbinnenmarkt-FINALE.pdf) buying insurance products was only possible on 47% 
of the insurance websites, and it was possible in only 9.7% of the cases to subscribe to these contracts when living in a 
different country.  

available 

online: 

19 

 
                                                           
However, a recent European Banking Authority (EBA) report67 stresses that there appears to 
be  widespread  use  of  digital  platforms68  to  market  and  distribute  payment  services,  credit 
products  (including  short-term  unsecured  loans  and  mortgage  products)  and  investment 
products, and it should increase. This is expected to increase cross-border provision of financial 
services. This is confirmed by the desk research linked to this Initiative, which indicates that 
digitalization, the entrance of new players (e.g. FinTechs), new services (e.g. P2P lending) 
and the use of new channels (e.g. mobile apps) will continue to grow in the coming years. Just 
as  an  example  from  the  banking  sector,  according  to  a  2018  European  Banking  Federation 
survey, 90% of the banks surveyed highlighted that digitalization was their main priority.  

In this light, the revision of the rules concerning financial services will help overcome a number 
of  the  barriers  mentioned  above,  including  entrance  costs  on  the  business  side  and,  on  the 
consumer  side,  will  help  increase  consumer  trust  and  confidence  in  buying  services  cross-
border. However, this Initiative will not be able to overcome issues related to geo-blocking or 
emotional, cultural and language barriers. 

In addition, the DMFSD, through its safety net, plays an important part in ensuring a level 
playing  field  for  all  competitors  providing  financial  services.  In  fact,  65%  of  the  industry 
stakeholders consulted during the preparation of the Evaluation Study believe that the safety 
net  feature  ensures  that  future  products,  that  might  not  be  yet  subject  to  product  specific 
legislation,  would  at  least  be  subject  to  the  rules  of  the  DMFSD.  This  is  shared  too  by  the 
majority of the consumer organisation replying to the survey ran by the contractor working on 
the Support Study. In this regard, the Directive creates a level playing field since it ensures a 
minimum  set  of  rules  applies  to  all  current  and  future  services  and  providers,  thereby 
preventing  unfair  competition  from  providers  exploiting  legal  loopholes  due  to  a  lack  of 
product-specific legislation. 

2.2. What are the problem drivers? 

Driver 1: Lack of legal clarity 

When the Directive was adopted, the EU acquis in the area of financial services was limited. 
However, over the years the progressive adoption of EU rules in the different financial services 
has led to issues of coherence with the product specific legislation. The sources driving this 
lack of legal clarity can be attributed to: 

(a)  the  lack  of  a  clear  hierarchical  provision  in  the  current  DMFSD  setting  out  the  lex 
generalis/lex  specialis  relationship  between  it  and  the  product-specific  or  horizontal 
legislation.  In  fact,  nearly  half  of  the  business  associations  and  company  organisations 
responding to the public consultation rated the issue of over-lap concerning the provision on 
pre-contractual information and right to withdrawal as occurring often or on a daily basis. In 
addition, the issue of overlapping legislations creating legal uncertainty has been reported in 

67 EBA, Report on the use of digital platforms in the EU banking and payments sector, September 2021. 
68 Please note that the definition of ‘digital platform’ adopted for the report  

20 

 
                                                           
different studies69 and the figure in the Evaluation study stating that half of the position papers 
received flagged the overlap issue was experienced during the preparation of this initiative.  

(b)  the  fact  that  the  DMFSD  uses  vague  terms  ‘in  good  time’  in  Article  3  DMFSD,  ‘fully 
completed performance’ in Article 6(2)(c) DMFSD and that while it is generally technological 
neutral in that it applies regardless of the technology used by the financial providers, it still 
refers  to  outdated  technologies  (e.g.  floppy  disk,  fax).  In  fact,  according  to  the  Evaluation 
survey, only 1% of consumers used a fax machine during the period 2013-2018 to buy at a 
distance a financial product.  

Driver  2:  Developments  in  consumer  behaviour,  often  exploited  by  providers,  making 
regulatory framework inadequate 
Over  the  past  twenty  years  consumer  behaviour  has  evolved70,  fuelled  by  the  spread  of  the 
internet  and  the  appearance  of  mobile  devices.  In  fact,  the  Behavioural  Study  notes  that 
consumers  nowadays  prefer  a  more  direct  and  faster  conclusion  of  contracts  in  the  area  of 
financial services. The Support Study accompanying this Initiative, highlights in the analysis 
of the consumer journey, consumers biases, such as anchoring or herd behaviour, which may 
trigger consumer detriment and points out that the Directive does not adequately address such 
behaviour.  For  instance  reference  is  made  to  practices  by  financial  service  providers  which 
prey on the consumer’s desire to buy a product in a fast manner. In this context, the provider 
promotes its products by saying that, for instance, a loan can be provided in less than 15 minutes 
or through just one-click. Often, the loan agreement that the consumer buys would turn out not 
to be the ideal one. 

Driver 3: Emergence of new distribution channels and financial services due to increased 
digitalisation 

Digitalisation  has  refashioned  the  relationship  between  the  consumer  and  the  financial 
provider.  It  has  led  established  players  to  adapt  their  marketing  and  business  practices  and 
fostered the entry into the market of new players with new business models (e.g. fintech firms). 
In  addition,  these  new  channels  impact  also  the  quality  of  the  information  the  consumer 
receives at pre-contractual stage (e.g. the provision of pre-contractual information based on the 
DMFSD for a mobile phone screen may not necessarily empower the consumer). For instance, 
a  consumer  needs  to  swipe  around  thirty  times  in  order  to  read  all  the  pre-contractual 
information on his mobile device. In addition, new financial service products have appeared 
since 2002, across the different financial services sectors, such as buy now pay later credits or 
Amazon selling insurance products online in Germany.71 

69 For instance, LE et al. (2019); CEPS (n.d.) The Future of Retail Financial Services What policy mix for a balanced 
digital  transformation?.  Available  at:  https://www.ceps.eu/system/files/TFRFutureFinancialServices.pdf;  OECD, 
G20/OECD  Policy  Guidance  Financial  Consumer  Protection  Approaches  in  the  Digital  Age.  Available  at: 
https://www.oecd.org/finance/G20-OECD-Policy-Guidance-Financial-Consumer-Protection-Digital-Age2018.pdf; 
European  Banking  Opinion:  Opinion  on  disclosure  to  consumers  of  banking  services  through  digital  means 
https://www.eba.europa.eu/sites/default/documents/files/document_library//Opinion%20on%20disclosure%20through
%20digital%20means.%20FINAL.pdf.  
70 LE et al. (2019). 
71 European Insurance and Occupational Pensions Authority (EIOPA) - Consumer Trends Report 2019, 2020, available 
at: https://www.eiopa.europa.eu/document-library/consumer-trends-report/consumer-trends-report-2020_en. 

21 

 
                                                           
2.3. How will the problem evolve? 

The concerns linked to the evolution of the Problem 1 will continue to increase, in the 
sense that the  decline of  the relevance of certain articles of the DMFSD is  expected to 
persist and the issues of coherence with the other EU legislation are expected to increase. 
The relevance is expected to decline  since a number of products currently falling under the 
DMFSD  should,  once  the  revised  Consumer  Credit  Directive  and  Markets  in  Crypto-assets 
Regulation72enter into application, be regulated by the latter legislations. There is no indication 
that the Commission will not use its right of initiative in the area of financial services and thus 
future legislation in the area of application of the DMFSD may be expected. More product-
specific legislations in the future also mean that due to the lack of a clear hierarchical norm in 
the DMFSD, more issues of duplication and legal uncertainty may be expected. Not intervening 
will also continue to render certain parts of the DMFSD framework obsolete, in the sense that 
references  to  outdated  technologies  will  continue  to  feature  and  the  articles  on  unsolicited 
communication and on unsolicited services which are already superseded by more recent EU 
legislation will continue to feature. 

In addition, the evolutions and disruptions to the market brought by the digitalisation of 
the financial services will continue. In fact, Eurostat73 estimates that in 2020, around 12% of 
the individuals in the EU have purchased at least one financial service online. The increase in 
the number of individuals who have purchased financial services online from 2015 to 2019 has 
been of 5 percentage points74. Even though, as explained in the Directive’s Evaluation, in the 
last  years  the  share  of  consumers  reporting  problems  across  various  financial  services  has 
decreased,  with  more  and  more  consumers  purchasing  financial  services  at  distance,  the 
volume of problems would increase. 
At the same time, the FinTech sector has had considerable transaction value in 202075. New 
products  like  Buy  Now  Pay  Later  schemes,  i.e.  interest  free  short  term  credits  to  spread 
payment of retail goods currently covered by DMFSD but not by sector-specific legislation, 
have been continuously growing in EU countries for several years. But also outside the EU: in 
the UK the unregulated Buy Now Pay Later market more than trebled in size in 202076, and in 
the US it faced massive growth due to COVID-19 is expected to triple by 2024 (from USD 39 
billion in 2020)77. 
The further digitalisation of the financial services sector also implies the possible emergence 
of more complex financial services/products, increased speed with which consumers can sign 

72 Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending 
Directive (EU) 2019/1937, COM/2020/593 final. 
73  Eurostat  (2021),  Digital  economy  and  society.  Financial  activities  over  the  internet  (2020  onwards),  available  at: 
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=isoc_ec_ifi20&lang=en. 
74  Ibidem. 
75  Statista  (2021),  Total  transaction  value  in  EUR  in  Fintech  sector  (EU  27  Member  States).  Available  at: 
https://www.statista.com/outlook/dmo/fintech/eu-27 
76  Financial  Conduct  Authority,  The  Woolard  Review  -  A  review  of  change  and  innovation  in  the  unsecured  credit 
market, 2021, available at https://www.fca.org.uk/publication/corporate/woolard-review-report.pdf. 
77 Mercatory Advisory Group, Buy Now, Pay Later: Gaining Scale and the Disrupting Status Quo in Lending, 2021, 
https://www.mercatoradvisorygroup.com/Reports/Buy-Now_-Pay-Later--Gaining-Scale-and-the-
available 
Disrupting-Status-Quo-in-Lending/. 

at 

22 

 
                                                           
a  contract  and  purchase  a  financial  service  (e.g.  speedy,  or  ‘one-click’  products)  and  more 
sophisticated tools to better influence and shape consumer behaviour (e.g. using ‘Big Data’ to 
personalise communications and offers, giving prominence solely to positive reviews, or using 
influencer marketing).  

Further  digitalisation  could  also  lead  to  increased  cross-border  purchases  of  financial 
services. According to the Consumer Conditions Survey 2021, in 2020 27% of EU consumers 
purchased a good or a service from a provider located in another EU country. This represents 
an increase of 9 percentage points since 201478. 

The consequences of the current problems and the possible evolution impacts the Directive’s 
two main objectives, namely ensuring a high level of consumer protection and fostering the 
provision of cross-border financial services. In fact, from the consumer side, the consequences 
of  the  current  and  future  problems  are  that  consumers  who  have  suffered  detriment  (for 
instance, bought through digital means a loan that was not fit for him/her) have less trust in the 
market. On the other hand, consumers, because of the problems and problem drivers explained 
above, might not have trust in buying a financial service at a distance in the first place. With 
regard to the objective of fostering the provision of cross-border financial services, the over-
lap issue has caused unnecessary compliance costs (e.g. providing two sets of pre-contractual 
information  documents)  and  the  current  and  future  barriers  has  led  and  will  lead  to  loss  of 
welfare since opportunities are not taken up. 

78 See https://ec.europa.eu/info/sites/default/files/ccs_ppt_120321_final.pdf.  

23 

 
                                                           
2.4. Intervention logic 

Figure 2 below illustrates the three problems inflicting the current Directive (column in red labelled ‘Problems’) and the three drivers (horizontal 
box  at  the end of the figure labelled) that  are the source for the three identified problems.  The problems and the problems  drivers have been 
explained in Chapter 2. As will be explained in the next chapters, in particular Chapter 4, this Initiative pursues 3 general objectives which can 
then be further broken down into 5 specific objectives (column in the middle of the figure coloured in blue). These 5 specific objectives are linked 
to the respective three identified problems. The column on the right (coloured in orange) proposes the three options identified as possible options 
to fulfil the objectives of this initiative (they are further explained in Chapters 5 till 8). In short, the three options propose a set of measures that 
aim to address as best as possible the general and specific objectives of this initiative that, in turn, address the problems inflicted to the Directive.  

24 

 
 
 
Figure 2. Intervention logic

25 

 
3.  WHY SHOULD THE EU ACT? 

3.1. Legal basis 

The  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  confers  upon  the  EU  the 
competence  to  adopt  measures  for  the  establishment  and  functioning  of  the  internal  market 
(Article 114 TFEU). More specifically, according to article 114(1) TFEU, the EU can adopt 
measures for the approximation of Member States rules and, pursuant to article 114(3) TFEU, 
with regard to consumer protection the EU ‘will take as a base a high level of protection’.  

Article 169(1) TFEU, relating to consumer protection, states that to promote the interests of 
consumers and ensure a high level of consumer protection, the EU shall contribute to protecting 
the health, safety and economic interests of consumers, as well as to promoting their right to 
information, education and to organise themselves to safeguard their interests. Article 169(2) 
TFEU  specifies  that  these  objectives  can  be  reached  through  measures  adopted  pursuant  to 
Article 114 TFEU in the context of the internal market completion.  

This  is  the  legislative  approach  taken  also  for  the  adoption  of  the  DMFSD  in  the  field  of 
distance marketing of financial services to consumers. The objectives set out in Article 169 
TFEU are meant to be achieved through Article 114 TFEU, which serves as the legal basis for 
the possible revision to be carried out through this initiative. 

Accordingly, Recital 1 of the DMFSD states that ‘[i]t is important, in the context of achieving 
the aims of the single market,  to  adopt  measures designed to  consolidate progressively this 
market and those measures must contribute to attaining a high level of consumer protection, in 
accordance with Articles 95 and 153 of the Treaty’. Recital 2 of the DMFSD further outlines 
that  ‘[b]oth  for  consumers  and  suppliers  of  financial  services,  the  distance  marketing  of 
financial  services  will  constitute  one  of  the  main  tangible  results  of  the  completion  of  the 
internal market’. 

3.2. Subsidiarity: Necessity of EU action 

Since  2002  the  number  of  EU  Member  States  has  significantly  increased  and  the  internal 
market has thoroughly expanded, making even more relevant the consequences arising from 
its malfunctioning. The legal framework for retail financial services has evolved since 2002, 
including through the development of product-specific legislation and horizontal legislation.  

This, coupled with the gradual creation of the Capital Markets Union (CMU) – started in 2015 
and boosted through the actions detailed in the new CMU plan adopted on 24 September 2020, 
increases the necessity of a revision of the DMFSD. Integrating national capital markets into a 
unified EU single market, making the EU a safer environment to invest and reducing obstacles 
to make financing accessible to European companies and households require an update of the 
DMFSD  to  fully  benefit  from  the  advantages  of  distance  marketing  of  financial  services 
without reducing consumer protection.  

The development of robo-advisors and online trading platforms is an example of how distance 
marketing  can  now  take  different  forms  as  compared  to  the  past.  Considering  the  changed 
scenario, a revision of DMFSD is justified. Considering these new distribution channels, the 

26 

 
cross-border  element  is  expected  to  increase  and  thus  this  Initiative  will  ensure  the 
establishment of rules that will strengthen the cross-border element through harmonised rules. 

3.3. Subsidiarity: Added value of EU action 

In  light  of  the  situation  as  developed  over  the  past  two  decades,  improving  the  current 
regulatory framework can only be achieved at EU level. The EU added value of doing so would 
be to bring a clearer legislative framework that ensures legal certainty, achieved through more 
harmonisation. 

In the retail financial services field, harmonisation in financial regulation aims to protect the 
financial  system  from  market  failures  whose  effects  can  spill  over  across  the  EU.  In  fact, 
regulatory  frameworks  providing  consumers  with  different  levels  of  protection  in  some 
Member States could create negative externalities possibly affecting also market participants 
based in other Member States. It is key to increase consumers’ trust in distance marketing of 
financial services by rising the available legal safeguards within a harmonised context.  

Rules concerning distance marketing are meant to favour cross-border provision of financial 
services  and  FinTech  innovations  in  turn  can  further  facilitate  the  provision  of  financial 
services  from  a  distance.  Finally,  the  revision  of  the  DMFSD  aims  at  addressing  those 
shortcomings identified by the Evaluation, with a view to better achieving the objectives of the 
Treaties – namely enhancing consumer protection while favouring the conclusion of contracts 
from a distance, thereby further integrating the internal market for financial services. 

In conclusion, there are two main reasons why the EU should act, in particular to foster the 
cross border offering of financial services. First, digitalisation is creating a dynamic through 
which  BigTechs  may  become  increasingly  active  in  financial  services.  The  possibility  of 
BigTechs  offering  financial  services  cross-border  leads  to  opportunities  and  risks; 
opportunities in the sense that BigTechs can scale up rapidly and thus offer products across 
borders in a fast manner; risks in the sense that BigTechs can leverage their dominance and, 
for instance, engage into product tying or bundling or behave in a way that is not data protection 
friendly. Second, the Directive offers the EU with the chance to address such opportunities and 
risks, especially since the Directive provides a wide definition of the term ‘financial service’, 
thus  covering  all  possible  financial  sectors.  Addressing  such  risks  leads  to  two  tangible 
benefits: (i) Equal playing field - ensuring that current or future financial services offered by 
BigTechs are subject to the same regulation as traditional financial services. One of the main 
feature of the Directive is the ‘safety net’ feature, meaning that its provisions apply  also  to 
products that appear on the market  for which no product-specific legislation exists yet (e.g. 
cryptocurrencies). The safety net feature in the context of cross-border sales of products and 
services is appreciated in particular by traditional financial service providers; (ii) Consumer 
trust:  the  fact  that  consumers  are  provided  with  basic  rights  (pre-contractual  information  & 
right to withdrawal) increases trust and this leads to more cross-border purchases of financial 
services.  In  light  of  the  above,  EU  intervention  is  warranted  both  for  current  and  future 
products. 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1. General objectives (GOs) 

In line with the original objectives of the Directive, the general objectives of this Initiative are:  

27 

 
  GO  1:  Streamlining  of  the  regulatory  framework  ensuring  higher  clarity  for  all 

stakeholders, whilst ensuring a high level of consumer protection. 

  GO 2: Reduce detriment and ensure a high and consistent level of protection for consumers 

purchasing financial services at distance. 

  GO3: Facilitate cross-border provision of financial services and the competitiveness of the 

internal market. 

4.2. Specific objectives (SOs) 

GO 1  

SO 1: Simplify  the existing legal framework by  removing regulatory overlaps and ensure that the 
Directive’s relevant provisions are included in the most adapted regulatory legislation(s) (problem 1) 

GO 2 

SO 2: Ensure that consumers purchasing financial services at distance are empowered by effective 
and timely information (problem 2.1) 
SO  3:  Ensure  that  consumers  reflect  on  their  purchases  and  exit  unsuitable  agreements  for  the 
provision of financial services (problem 2.2) 
SO 4: Prevent that consumers are nudged into purchasing financial services which are not in their 
best interest (problem 2.3) 

GO 3 

SO 5: Reduce barriers for providers offering financial services across borders while enabling more 
choice for consumers (problem 3) 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

Table 2. Summary of the policy options assessed  

Option 0: Baseline scenario – no policy change 
Option 1: Repeal of the Directive and non-regulatory measures 
Option 2: Comprehensive revision 
Option 3: Repeal, 
modernisation of relevant 
provisions introduced in other 
legislation  

Option 3a: relevant provisions introduced in horizontal legislation 

Option 3b: relevant provisions introduced in product-specific legislation 

The  three  identified  policy  options  are  effective  and  propose  substantially  different  policy 
measures.  The  option  design  is  wide  and  ranges  from  Repeal  (Option  1)  of  the  current 
framework to comprehensive reform (Option 2). These two distinct policy options had support 
from  different  stakeholders  right  from  the  start  of  the  consultations.  A  third  policy  choice 
proposed to repeal the current Directive but safeguard its relevant provisions, either in another 
regulatory legislation or directly in the product-specific legislations.  

The starting point of the initiative was based on one of the main outcomes of the Evaluation, 
namely  that  the  needs  originally  addressed  by  the  Directive  have  progressively  but  not 
exhaustively  been  addressed  by  other  EU  legislation  (reduced  relevance)  and  that  there  is 
significant overlap between the Directive and subsequent EU legislation (lack of coherence). 
The founding aim of the initiative was to simplify the current legislative framework (General 
Objective 1 and Specific Objective 1). As a first step, a mapping exercise was conducted to 
check the degree of overlap between the Directive and other EU legislations and the remaining 
legal relevance of the Directive. After conducting the mapping exercise and identifying those 
financial  sectors  were  the  Directive  was  still  legally  relevant,  the  practical  relevance 
(effectiveness) on the ground for the stakeholders was examined.  At this stage, the safety net 
feature was analysed: an examination was conducted to see whether in those instances where 

28 

 
 
the  Directive  was  still  legally  applicable  (for  instance  in  insurance  sector  and  for  private 
pensions) the stakeholders were actually applying it on the  ground. This two-step approach 
could  have  led  to  a  total  repeal  of  the  directive  and  abandoning  of  the  safety  net  function, 
namely if the Directive and its key features were not used on the ground. However, the outcome 
was that in certain cases it was still legally relevant and applied on the ground. 

In this context, Option 1 (Repeal) was the starting point and could not be discarded upfront, 
since  the  objective  of  simplifying  the  current  legislative  framework  (eliminating  overlaps) 
could  have  been  achieved  through  this  Option.  In  addition,  it  is  worth  noting  that  in  the 
Inception Impact Assessment replies, businesses were either in favour of keeping status quo or 
in favour of repeal. 

5.1. What is the baseline from which options are assessed? 

The baseline from which options are assessed (Option 0) is a "no policy change" scenario. It 
implies  the  continuation  of  the  status  quo  for  the  period  2022-2031.  Hence,  the  Directive 
would remain in force but no specific measures would be undertaken to tackle the problems 
detailed in Section 2, which could evolve as explained in Section 2.3 (How will the problem 
evolve). 

Certain  provisions  of  the  DMFSD  are  still  relevant  for  facilitating  consumer  protection  in 
distance selling and marketing of financial services79. According to the Directive’s Evaluation, 
15-28  million  EU  consumers  have  benefited  from  key  Directive  provisions  since  its 
transposition in 2004, chiefly in the context of payment accounts, insurance and - to a lesser 
extent – pensions and consumer loans.  

In  the  baseline  scenario,  the  Commission  would  continue  to  monitor  the  Directive 
implementation  at  national  level,  and  national  authorities  would  continue  to  enforce  it. 
Enforcement  authorities  would  continue  to  cooperate  through  the  Consumer  Protection 
Cooperation (CPC)  network and the European Consumer Centres  Network (ECC-Net). The 
Court  of  Justice  of  the  European  Union  (CJEU)  would  continue  to  interpret  the  Directive, 
shedding further light on some of the unclear provisions, when required to do so. 

With regard to the impact of currently proposed legislation by the Commission, this will be 
particularly of a regulatory nature (see Section 2.4). On the one hand, the current Consumer 
Credit Directive and Markets in Crypto-assets Regulation proposals will lead to less products 
being  captured by the  DMFSD and thus  result in  a reduction of its relevance. On the other 
hand, the current Solvency II proposal will lead to more insurance firms falling under the scope 
of the DMFSD. This is so since the revision of Solvency II proposes to exempt insurance firms 
currently  falling under Solvency  II  and thus,  whenever the service is  sold at  a distance, the 
DMFSD would apply. 

Keeping  status  quo  has  only  received  mild  support,  mainly  from  financial  providers  who 
oppose  repealing  the  Directive.  In  fact,  half  of  the  financial  providers/associations  who 
responded to the Inception Impact Assessment are in favour of keeping the current framework 

79 See Legal analysis, Supporting study to the Impact Assessment (VVA et al.). 

29 

 
 
                                                           
for  two  main  reasons:  first,  they  view  positively  the  technology  neutral  approach  of  the 
Directive; second, the safety net feature is important for certain current financial services and 
for  future  ones.  With  regard  to  the  actual  application  of  the  safety  net  feature,  through  the 
different consultations held, public authorities have cited a number of instances when they use 
the DMFSD, including in the area of investment in expensive wines and diamonds, or certain 
gift-cards that fall outside the scope of PSD II, or current loans below EUR 200 that fall outside 
the Consumer Credit Directive. Public authorities have also been recorded as stating that they 
use the DMFSD as a top-up when carrying out investigations, meaning that they include the 
provisions  of  the  DMFSD  in  conjunction  with  the  product-specific  legislation.  In  addition, 
national  courts  have  also  used  the  DMFSD80  vis-à-vis  still  unregulated  products  (e.g. 
crypocurrencies). 

5.2. Description of the policy options 

In addition to the baseline scenario, four other options are considered to address the problems 
identified, with the aim to achieve the initiative’s objectives, as shown in the intervention logic 
(Figure 2).  

Table 3. Proposed measures per Policy Option covering financial services 

Simplification 
of the legal 
framework 
(problem 1) 

Option 1: Repeal 
and non-regulatory 
measures 

Option 2: 
Comprehensive 
revision 

Repeal would 
eliminate current 
over-lap and thus 
help simplifying the 
framework. Repeal 
would also lead to 
the disappearance of 
the “safety net” 
feature provided by 
DMFSD  

Clarify in the legislation 
that new measures going 
beyond the current 
sector specific 
legislations would apply 
to all financial services, 
but that sector specific 
legislation applies when 
there is an overlap with 
DMFSD. 

Option 3a: Repeal, 
modernisation of 
relevant provisions 
injected in horizontal 
legislation(CRD) 

Option 3b: Repeal, 
modernisation of 
relevant provisions 
injected in product-
specific legislation  

Clarify in the 
legislation that sector 
specific legislation 
applies when there is 
an overlap with the 
modernized former 
DMFSD articles. 

Repeal would help 
simplifying the 
framework. No “safety 
net” feature for future 
products that would 
not be subject to 
product specific 
legislation. 

Verona 

80 
https://www.dirittobancario.it/sites/default/files/allegati/tribunale_di_verona_24_gennaio_2017_n._195.pdf. 

Decision 

January 

Court, 

n°195 

2017, 

available 

24 

of 

at: 

30 

 
 
                                                           
Information 
(problem 2.1) 

Financial education 
campaigns to improve 
financial and digital 
literacy, run by the 
European Commission 
and the relevant EU 
agencies, such as the 
European Insurance and 
Occupational Pensions 
Authority. 

Introduce rules on 
information to be 
included in advertising; 
Standardised pre-
contractual information 
form for all financial 
services; 
Introduction of rules on 
robo-advice to enhance 
transparency and 
fairness; 
Specify the timing for 
the provision of the key 
information (i.e. 
information are provided 
not generically “in good 
time” but at least “one 
day before” the contract 
is concluded). 

Right of 
withdrawal 
(RoW) 
(problem 2.2) 

Awareness raising 
campaigns on consumer 
right of withdrawal, 
organised by the 
European Commission 
and the relevant EU 
agencies. 

Provision of a specific 
“Withdrawal form” 
including standard rules 
on manner of exercise 
for the right of 
withdrawal. 

Exploitative 
practices 
(problem 2.3) 

Industry self-regulation 
to avoid harmful 
practices, based on an 
EU Recommendation. 

Ban on product tying. 

Require that 
information is adapted 
to the channel on 
which it is displayed; 
Modernization of the 
information that needs 
to be provided to 
consumers (e.g. 
inclusion of the need 
to mention email 
address); 
Specify the timing for 
the provision of the 
key information i.e. 
information is 
provided not 
generically “in good 
time” but at least “one 
day before” the 
contract is concluded) 
Alternatively, 
mandatory reminder of 
the Right of 
Withdrawal after the 
conclusion of the 
contract). 

Require that 
information is adapted 
to the channel on 
which it is displayed; 
Modernization of the 
information that needs 
to be provided to 
consumers (e.g. 
inclusion of the need 
to mention email 
address); 
Specify the timing for 
the provision of the 
key information (i.e. 
information are 
provided not 
generically “in good 
time” but at least “one 
day before” the 
contract is concluded). 
Alternatively, 
mandatory reminder of 
the Right of 
Withdrawal after the 
conclusion of the 
contract. 

Reminder of the right 
of withdrawal in case 
pre-contractual 
information is 
provided less than one 
day before. Financial 
service providers to 
provide for a 
cancellation button. 

Reminder of the right 
of withdrawal in case 
pre-contractual 
information is 
provided less than one 
day before. Financial 
service providers to 
provide for a 
cancellation button. 

Prohibition of default 
options e.g. pre-ticked 
boxes. 

Prohibition of default 
options e.g. pre-ticked 
boxes. 

Establishment of a new 
framework. 

Establishment of new 
provisions bringing 
legal clarity. 

Establishment of new 
provisions bringing 
legal clarity. 

Cross-border 
offer and 
access 
(problem 3) 

Guidelines by the 
European 
Commission on 
information 
disclosure and on the 
application of right 
of withdrawal to 
increase 
harmonisation. 

Option 1: Repeal of the Directive and non-regulatory measures 

Option 1 envisages the repeal of the Directive.  In procedural terms, the Commission would 
need to adopt a proposal to repeal the current DMFSD. This would then be subject to the co-
decision procedure.  

31 

 
  
 
 
 
 
With  regard  to  Problem  1  and  the  linked  actions  to  ensure  a  simplification  of  the  legal 
framework, the result of the Commission proposal to repeal would be that at EU level, once 
the  current  DMFSD  is  repealed,  there  would  no  longer  be  EU  horizontal  rules  providing 
consumers with rights and applicable to future financial services or products for which there 
would not, as yet, be product-specific legislation (i.e. no more safety net). In addition, there 
will no longer be EU horizontal rules in those areas for which the DMFSD is still relevant (e.g. 
right of withdrawal in the insurance or payments area). Thus, the repeal of the DMFSD frees 
Member States from the obligation to transpose, implement and enforce the current provisions 
of the DMFSD.  
This measure of repealing the DMFSD implies that the overlap at EU level of the rules of the 
DMFSD and the corresponding rules of the product specific legislation will no longer exist, 
thereby simplifying the EU legislative framework. However, this does not mean that Member 
States will automatically repeal their current rules81. Therefore, financial providers might still 
be  bound  by  the  current  national  rules,  which,  as  time  goes  by,  might  become  different 
depending on the different Member State legislative action82. In fact, if legislation at national 
level is amended, businesses would need to comply with new rules and consumers would need 
to familiarise themselves with them. If the level of consumer protection is lowered from the 
current  one,  enforcement  authorities  might  need  to  deal  with  an  increased  number  of 
complaints.  In addition,  since there would no longer be harmonised rules  established at EU 
level, there might also be Member States that remove the right of withdrawal, thus creating 
disparities  across  Member  States  and  increasing  the  uncertainties  of  contracting  a  financial 
service across border. 
With  regard  to  Problem  2.1  and  the  linked  actions  to  improve  the  right  of  pre-contractual 
information, in the absence of EU rules, financial education campaigns to improve financial 
and digital literacy would be required to combat the issue concerning information issues at the 
pre-contractual  stage.  The  European  Commission,  in  conjunction  with  the  relevant  EU 
agencies,  would  set  up  such  a  campaign  which  Member  States  would  then  implement  and 
complement on the ground.  
With regard to Problem 2.2 and the linked actions to improve the right to withdrawal, in those 
Member States that would have kept the right of withdrawal, an awareness campaign on the 
existence  of  the  right  of  withdrawal  may  be  envisaged.  The  aim  would  be  to  inform  and 
empower the consumer of the availability of this right. Similar to action proposed for Problem 
2.1, the European Commission, in conjunction with the relevant EU agencies, would set up 
such a campaign which Member States and their public authorities would then implement and 
complement on the ground. 
With regard to Problem 2.3 and the linked actions to address exploitative practices, in an effort 
to ensure consumer trust, financial services, on the basis of a Recommendation proposed on 
the basis of Article 288 TFEU, providers may implement out of their own will practices that 
do not cause consumer detriment (self-regulation by industry). 

81 During the stakeholder consultations, certain public authorities have expressed the view that they would keep the 
current rules, regardless of what happens to the DMFSD. 
82 The possibility for Member States to deviate one from another concerns those parts of the current DMFSD which are 
still relevant, such as the right of withdrawal in the insurance sector (See Section 2.1 to see which parts of the current 
DMFSD are still relevant). 

32 

 
                                                           
With regard to Problem 3 and the linked actions to improve cross-border and access, in addition 
to  the  actions  under  Problem  2.1  and  2.2,  guidelines  by  the  European  Commission  on 
information  disclosure  and  on  the  application  of  the  right  of  withdrawal  may  increase  the 
provision  of  cross-border  financial  services,  even  though  the  DMFSD  would  have  been 
repealed.  

Option 2: Comprehensive reform 

Option 2 entails a comprehensive reform of the current framework through the introduction of 
new measures. Some of the below measures have been inspired by the Recommendations of 
the  Behavioural  Study  on  the  digitalisation  of  the  marketing  and  distance  selling  of  retail 
financial services, the Evaluation or the contributions by consumer organisations in the context 
of the stakeholder contributions or other legislations, such as the Payment Account Directive 
or  the  recent  proposal  to  revise  the  Consumer  Credit  Directive.  This  option  would  entail  a 
substantial review of a self-standing act (the Directive itself). Hence, the measures could go 
beyond what is currently in the Directive and address issues such as robo-advice. Since out of 
the three policy options, Option 2 is the only comprehensive reform proposing to set out new 
rules, certain measures, such as measures concerning robo-advice are only included under this 
policy option. Under this policy option: 
Problem 1 (the simplification of the current framework) would be addressed by the following 
measures: 

 

 

the  introduction  of  a  hierarchical  norm  to  specify  that  in  case  of  an  over-lap  of  the 
obligations  stemming  from  the  DMFSD  and  the  sector-specific  legislation,  the  latter 
prevails; and 
 a provision explaining that the new obligations imposed by the ‘revised DMFSD (e.g. ban 
on tying) will need to be applied to all financial services. 

The addresses of these  complementary  measures  are the  Member  States  that  would need to 
transpose the new provisions and public authorities would then need to enforce the appropriate 
legislation. 
Problem 2.1 (issues with pre-contractual information) would be addressed by the following 
measures: 

  Introduction  of  rules  on  how  information  provided  at  the  advertising  stage  would 
need to be channelled. Advertising is a powerful tool as it nudges consumers to purchase 
a product and often uses tools influencing behavioural biases to do so. Most of the time, 
the problems involve costs and risks not being properly disclosed in the advertisements. At 
present, the DMFSD does not regulate the provision of information at the advertisement 
stage. Thus, this will be a new area to be tackled by the DMFSD and the provision will 
establish how the information would need to be channelled so that the consumer obtains 
information in a transparent manner. In this regard, the DMFSD would propose a set of 
provisions regulating standard information for advertising. Concretely, the provision would 
set  out  the  format  and content of how advertisement should be  carried  out  for financial 
services. The content would include an overview of the main characteristics of the product, 
the  total  price  and  warnings  depending  on  the  level  of  sophistication  of  the  financial 
product.  The  addressees  will  be  Member  States  in  the  sense  that  they  would  need  to 

33 

 
transpose  the  new  provision  and  their  public  authorities  that  would  need  to  enforce  the 
provision and financial services providers to comply with this new obligation.  

 

  Standardised pre-contractual information form for all financial services: inspired from 
the  pre-contractual  obligations  laid  down  in  the  Payment  Accounts  Directive,  a  fee 
information document and glossary (FID) for all financial services would introduced. The 
fee  information  document  would  be  a  stand-alone  document,  presenting  in  a  short  and 
concise manner the accurate amount in the currency of the financial service providers the 
fees  linked  to  the  product  or  service.  It  is  a  basic  document  capturing  the  key  standard 
information  requirements  which,  through  its  generic  nature,  would  be  able  to  apply  to 
present  and  future  financial  products.  The  main  addresses,  apart  from  the  necessary 
transposition and enforcement by Member States, would be financial service providers.   
Introduction of rules on robo-advice to enhance transparency and fairness: Digitalization, 
in  this  case,  Artificial  Intelligence,  is  bringing  new  automated  ways  of  interacting  with 
consumers. The European Commission Expert Group on Regulatory Obstacles to Financial 
Innovation (ROFEIG), in its Final Report to the European Commission83, refers to used 
cases of robo-advice in the financial sector (e.g. in brokerage and investment management 
or  in  insurance  products  and  services)  and  calls  on  the  Commission,  to  improve 
explainability and interpretability of services that use artificial intelligence (AI). Therefore, 
the DMFSD represents an opportunity to provide rules on robo-advice, to ensure that the 
advice provided is suitable, transparent, user friendly and void of any conflict of interest. 
In this regard, the robo-advice would need to be provided through a durable medium to 
ensure traceability and the rules will take the form of a set of provisions dedicated to this 
channel of communication. The provisions would regulate how the robo interacts with the 
consumer, in the sense that the quality of information provided by the robo would need to 
meet certain qualifications, such as being independent, transparent and to suggest products 
in the interest of the consumer. The main addresses would be financial providers that use 
robo-advice as part of their interaction with consumers.. 

  Specify the timing for the provision of the key information: In order to ensure that the 
consumer is not coerced to sign the contract without reflecting, specifying the current vague 
term ‘in good time’ would be required. Therefore, the time-gap between the provision of 
the  pre-contractual  information  and  the  actual  signing  of  the  contract  would  be  of  one 
working day. This would allow the consumer to digest the information before signing the 
contract.  

Problem  2.2  (the  sub-optimal  use  of  the  right  of  withdrawal)  will  be  addressed  with  the 
following  measures  inspired  by  the  Commission  proposal  to  Revise  the  Consumer  Credit 
Directive and the current provision on the right of withdrawal found in the Consumer Rights 
Directive: 

  Provision of a specific “Withdrawal form”: Article 11 of the Consumer Rights Directive 
regulates  the  exercise  of  the  right  of  withdrawal.  In  Annex  I  (B)  it  provides  a  model 
withdrawal  form  which  may  be  used  by  the  consumer  to  express  his/her  intention  to 
withdraw from the service or product. This model form would be extended to all financial 

83 ROFIEG (2019). 

34 

 
                                                           
services and would include standard rules on the manner of how the right of withdrawal 
maybe exercised. Therefore, whenever a consumer exercise his/her right to withdraw, the 
use of the form would need to be recognized by the service provider. The main addressees 
would the public authorities who would need to monitor and enforce this obligation and 
financial providers who would need to accept the withdrawal once this form is presented 
within the stipulated time. 

  Right of withdrawal clearly highlighted in the pre-contractual stage: Since the right of 
withdrawal is one of the key rights, has remained relevant for certain sectors, and financial 
services  products  may  be  complicated  for  a  consumer  to  understand,  an  obligation  on 
financial services providers will be set in order to clearly highlight this right at the pre-
contractual stage. This would be done in a way appropriate to the channel used. 

With regard to Problem 2.3 (exploitative behaviour by financial providers nudging consumers), 
Article 12 of the Mortgage Credit Directive  would be extended to  all the financial services 
market,  namely  a  ban  on  product  tying.  The  main  addresses  would  be  financial  service 
providers. 
With  regard  to  Problem  3  (cross-border  offer  and  access),  the  legal  framework  would  be 
sanitized and modernised.This option would, with the inclusion of the hierarchical provision, 
ensure more legal certainty and keep the safety net feature of the current Directive. This might 
increase the level of harmonisation and thus stimulate more cross-border offer. 

Option  3a:  Repeal,  modernisation  of  relevant  rights  injected  in  horizontal  legislation 
(Consumer Rights Directive) 

In this option, the DMFSD would be repealed and only the relevant consumer rights would be 
injected  in  the  Consumer  Rights  Directive.  The  relevance  of  the  three  consumer  rights 
enshrined in the DMFSD has been discussed above (problem 1). Since most of the articles of 
the  DMFSD  have  lost  their  relevance  and  the  lack  of  regulatory  intervention  on  its  legal 
framework has resulted in coherence issues with other legislations, only the still relevant rights 
would be saved, namely the right to pre-contractual information and the right to withdrawal. 
In doing so, these two rights would be modernized and rendered fit for the digital age, whilst 
also conserving the safety net feature in case future financial services products appear on the 
market and for which no legislation would apply.  
Since  the  DMFSD  would  be  repealed,  the  natural  place  to  move  these  rights  would  be  the 
Consumer Rights Directive, which is also a horizontal piece of consumer legislation. In this 
manner,  the  decision  taken  by  Directive  97/7/EC  (predecessor  of  the  Consumer  Rights 
Directive) to exclude financial services from its scope would be partially revisited. Under this 
option,  the  injection  of  the  modernised  rights  would  ensure  that  the  internal  balance  of  the 
Consumer Rights Directive is not impacted and that not all of its rules will apply to financial 
services.  Under this option,  apart from  the extension  of certain  rules currently  found in  the 
Consumer Rights Directive to distance marketing of consumer financial services, the proposed 
measures either build on the text of the Consumer Rights Directive or are inspired from the 
recent Commission Proposal to Revise the Consumer Credit Directive. 
Thus, in  short this option is  based on the concept  of reducing as far as possible the current 
overlaps  while  safeguarding  and  modernising  those  provisions  that  are  still  relevant.  So  in 

35 

 
essence,  option  3a  sanitizes  and  modernise  the  framework;  sanitizes  in  the  sense  that  the 
redundant rules (e.g on unsolicited communication) will not feature in the updated version of 
the  rules  concerning  financial  services  and  modernised  in  the  sense  that  the  still  relevant 
provisions  will  be  rendered  fit  for  the  digital  age.  This  will  be  carried  out  by  changing  the 
current exclusion of financial services from the Consumer Rights Directive and applying, as 
far as possible, its existing rules, in particular, on pre-contractual information and the right of 
withdrawal, to financial services. This explains also why measures proposed under option 2, 
such as robo-advice fit only under option 2, but not option 3. 

Measures under this Option: 
Problem 1 (the simplification of the current framework) would be addressed by the following 
measure 

  Clarification in the legislation that sector specific legislation applies when there is an 
overlap  with  modernized-former  DMFSD  articles:  Similar  to  Article  3(2)  of  the 
Consumer  Rights  Directive,  a  hierarchical  norm  to  specify  that  if  the  provisions  of  the 
modernized  former-DMFSD  articles  conflict  with  a  provision  of  another  Union  act 
governing that financial services product, the provisions of that other Union shall prevail 
and shall apply to the product.  

The following measures would address Problem 2.1 (issues with pre-contractual information):   

  Information  adapted  to  the  channel  on  which  it  is  displayed:  To  enhance  consumer 
empowerment  through  effective  information,  the  display  of  pre-contractual  information 
would have to be done in a way appropriate to the means used (mobile phone screen etc.).  
  Modernization of the information that needs to be provided to consumers: Information 
concerning the financial services provider would be modernised, to include, for instance 
the  provision  of  its  email  address  which  is  currently  missing  from  the  DMFSD.  The 
Consumer  Rights  Directive  would  serve  as  the  basis  for  the  required  updating  while 
ensuring that it fits the particular nature of financial services. 

  Specify the timing for the provision of the key information: Inspired by the Commission 
proposal  to  revise  the  Consumer  Credit  Directive,  the  term  ‘in  good  time’  would  be 
specified, namely that if the pre-contractual information concerning the financial service is 
provided less than one day before the contract is concluded, the financial services provider 
would be obliged to send a reminder of the possibility for the consumer to exercise the right 
of withdrawal. 

The addressees of the measures would be financial services providers. 
With  regard  to  Problem  2.2  (suboptimal  use  of  the  right  of  withdrawal)  the  mechanism 
explained above concerning ‘specifying the timing for the provision of the key information’ 
would also improve the right of withdrawal. The suggested mechanism would emphasise the 
existence of the right of withdrawal and thus, possibly trigger its use, where appropriate. In 
addition, to facilitate the exercise of this right, a rule obliging financial service providers to 
provide a cancellation button will be introduced.   
With regard to Problem 2.3 (exploitative behaviour by financial providers nudging consumers), 
Article 22 (Additional payments) of the Consumer Rights Directive could serve as the basis to 

36 

 
 
regulate default options in the financial services area. The main addresses will be the financial 
service providers.  
With regard to Problem 3 (cross-border offer and access), the repeal of the DMFSD and the 
injection  of  the  relevant  modernized  rights  would,  with  the  inclusion  of  the  hierarchical 
provision, ensure more legal certainty, keep the safety net feature of the current Directive and 
increase the level of harmonisation with regard to the right to pre-contractual information and 
the right of withdrawal. Thus, this should stimulate more cross-border offer. 

Option 3b: Repeal of the DMFSD, modernisation of relevant provisions injected in product-
specific legislation 

In this option, the DMFSD would be repealed and only the relevant consumer rights would be 
injected in the different product-specific legislation. The relevance of the three consumer rights 
enshrined in the DMFSD has been discussed above (problem 1). Since most of the articles of 
the  DMFSD  have  lost  their  relevance  and  the  lack  of  regulatory  intervention  on  its  legal 
framework has resulted in coherence issues with other legislations, only the still relevant rights 
will be saved, namely the right to pre-contractual information and the right to withdrawal. In 
doing so, these two rights will be modernized and rendered fit for the digital age.  
However,  unlike  Policy  Option  3a,  the  modernized  provisions  would  be  injected  into  the 
different  product-specific  legislation.  Thus,  for  instance,  the  right  of  withdrawal  would  be 
introduced into the Payment Accounts Directive. This would need to be repeated in all financial 
services legislation that currently do not offer the same level of rights as the DMFSD. In doing 
so, the level of consumer protection currently provided by the DMFSD would be conserved.  
However, two points are worth highlighting. In order to keep the same level of protection, the 
proposals to amend the product-specific legislation need to be agreed and adopted. In addition, 
this  approach  would  not  ensure  the  safety  net  feature,  in  the  sense  that  while  current 
products would be covered, future products that would not be as yet subject to legislation would 
remain outside the scope of any EU legislation. This is so since the Consumer Rights Directive 
excludes from its scope financial services and the DMFSD would be repealed. Therefore, the 
result of this policy option is that there would no longer be a consumer horizontal legislation 
covering financial services. 

The measures proposed  for Policy  Option  3b  are the same as for Policy  Option  3a,  but  the 
former differs in terms of the delivery instrument choice. This policy option is the outcome of 
the mapping exercise and the fact that the relevance of the Directive has been reduced. Through 
repeal but safeguarding the relevant provisions, the general and specific objectives could be 
reached. In addition, the methodology applied in order to identify the usefulness or not of the 
safety net (explained in the introductory part of Chapter 5) meant that option 3b could not be 
discarded from the start. 

5.3. Options discarded at an early stage 

The option to transform  the Directive into a Regulation  was  considered but  discarded at  an 
early stage. The prima facie strong point of turning the rules into a Regulation was that it would 
provide  directly  applicable  rules  thereby  ensuring  a  high  level  of  consumer  protection  and 
would have reduced barriers in the sense that the possibility for Member States to transpose 
the rules differently would be eliminated.  

37 

 
However, since 2002 the Directive has lost much of its relevance. Creating a large number of 
actions and making them directly applicable would run counter to the reality of the current state 
and use of the Directive. In addition, introducing new far-reaching measures and presented in 
the form of a Regulation would have increased, not decreased, the current problem caused 
by overlaps between it and the product-specific legislation. Thus, in terms of coherence, this 
option  would  have  led  to  complex  legal  untangling,  in  particular  on  recently  adopted 
legislations (e.g. the 2020 Crowdfunding Regulation) or on negotiations of recent legislative 
proposals such as the revision of the Consumer Credit Directive. 
In terms of efficiency, the preliminary indications were that the impact on public authorities 
would be negative since the expected recurrent monitoring and enforcement costs would be 
excessive. The one-off and recurrent compliance costs of such a far-reaching Regulation, 
especially handling consumers’ complaints, for financial service providers would have also 
been high, and did not seem proportionate. 
In terms of effectiveness, SO2, SO3 and SO4 (improvements for consumers) might have scored 
positively  under  the  discarded  option;  however,  under  SO1  (simplifyng  existing  legal 
framework) the score would have definitely been negative and would have outweighted 
any possible benefits. 

The  combination  of  options  3a  (Repeal,  modernisation  of  relevant  rights  injected  in 
horizontal  legislation)  and  3b  (Repeal  of  the  DMFSD,  modernisation  of  relevant 
provisions injected in product-specific legislation) as described above was also considered 
but then discarded upfront. The reason for discarding this combination upfront is that it would 
not  achieve  the  general  objective  and  specific  objective  1  to  simplify  the  existing  legal 
framework.  The  aim  of  the  revision  is  to  eliminate  overlaps  and  provide  legal  clarity  to 
stakeholders (businesses, citizens, Member States authorities). The combination of options 
3a and 3b will entail references to two legal texts (the revised Consumer Rights Directive 
and the product-specific legislation) and will require repeating the same provisions/suggested 
measures in the Consumer Rights Directive and the product-specific legislation. Such an option 
duplicates legal norms and departs from the objective of streamlining the regulatory framework 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

This section presents a qualitative and partially quantitative assessment of each of the policy 
options, on different categories of stakeholders, against three main criteria: 
  Effectiveness: how successful the policy option is expected to be in addressing the specific 
objectives (SOs) outlined in the intervention logic. The effectiveness of each option is rated 
using a scale from -5 (very low effectiveness) to 5 (very high effectiveness). The scoring 
is based on the results of the stakeholder consultation, including the Public Consultation, 
on desk research and legal analysis.  

  Efficiency: the impacts of the revision of the Directive on the different stakeholder groups, 
which can be either positive or negative. A wide array of economic, social, environmental, 
and  overarching  impacts  have  been  considered.  Based  on  their  expected  magnitude, 

38 

 
likelihood and relevance for stakeholders84 the following categories of significant impacts 
were selected85: 
Financial Service Providers: 
o  Expected weight of one-off compliance costs 
o  Expected  weight  of  recurrent  compliance  costs  (e.g.  costs  of  handling  consumers’ 

complaints) 

Consumers: 
o  Expected impact on consumer trust 
o  Expected impact on consumer detriment 
Public authorities: 
o  Expected impact on adaptation on one-off adaptation costs 
o  Expected impact on recurrent monitoring and enforcement costs 

The impacts were scored from -5 (very negative impact) to 5 (very positive impact). The 
results  of  the  qualitative  assessment  build  on  stakeholders’  views  in  the  various 
consultations and on the results of the quantitative estimates86. 

The cost for businesses that were taken into account for the purposes of the analysis are 
clustered into two groups: “one-off costs”, including costs that businesses are expected to 
incur in only at the time of the implementation of the regulatory revision; and “recurring 
costs”,  including  those  costs  that  are  expected  to  be  repeated  on  a  yearly  basis.  For  the 
purposes of the quantitative analysis, these costs have been considered for a period of 10 
years following the regulatory change and accounted at their net present value. 
The one-off costs considered for this study are: 

-  Costs related to familiarisation with the new regulatory framework; 
-  Costs incurred by financial services for the adapatation of their information systems 

(including website); 

-  Costs  incurred  for  the  update  of  the  documentation,  both  internal  and  for 

consumers’ information. 

-  Costs incurred for the update of staff training activities, accounted in proportion to 
the relevance of the DMFSD in relation to pre-contractual information and right of 
withdrawal; 

The recurrent costs for financial services estimated in the analysis: 

-  Compliant handling costs; 
-  Costs relevant for robo-advisors; 
-  Cost  reduction  due  to  the  simplification  (no  duplication)  of  the  documentation 

shared with customers. 

Regarding  the  impacts  on  consumers,  the  analysis  builds  on  the  estimates  of  consumer 
detriment calculated in the related evaluation study and provides an indication of the reduction 
in  consumer detriment  in  proportion of the reported expected  effectiveness  of the proposed 

84 Consulted stakeholders did not highlight disproportional impacts on SMEs in comparison to large enterprisesso they 
have not been assessed separately. Also costs for the EU public authorities have not been identified as significant as 
compared to costs for Member States public authorities, so they have not been assessed separately. 
85  The  impact  on  cross  border  trade  was not  included  among  the  impacts  assessed under  efficiency  to  avoid  double 
counting, because it is included in the effectiveness assessment. 
86 See section 7.3 and Annex 4. 

39 

 
 
 
                                                           
policy measures.87 For the purposes of this assessment, the estimated consumer detriment for 
the  year 2018  (DMFSD  evaluation  study) has  been extended for the period 2022-2031 at a 
discount rate of 4% per annum.  

  Coherence: how the measures planned would interact with other EU legislation and with 
EU  policy  objectives,  such  as  its  digital  priorities  (future  proof  approach),  leading  to 
increased legal clarity. The coherence score ranges from 0 (no change to the level of legal 
coherence) to 5 (increase of EU legal coherence to a very great extent). The scoring is based 
on the results of the stakeholder consultation, including the Public Consultation, on desk 
research and legal analysis. 

The attribution of scores and the description of the assessments are the result of an analytical 
exercise  detailed  in  the  supporting  study  based  on  desk  research,  legal  analysis,  expert 
judgment  and  stakeholder  consultation.  Evidence  collected  was  examined,  analysed  and 
triangulated. 

6.1. Option 1: Repeal of the Directive and non-regulatory measures 

With  repeal,  the  current  over-lap  between  the  DMFSD  and  product-specific  legislation 
would be eliminated, thereby simplifying the existing legislative framework and, at the same 
time,  ensuring  a  decent  level  of  ‘coherence’.  However,  this  Option  scores  poorly  under 
effectiveness and efficiency since it would lead to the lowering of consumer protection and 
open the way for possible uneven level playing field between current products and future 
products. The "cost-of non-Europe", namely the cost of the Union no longer acting, has been 
integrated as well. 

Effectiveness:  

-1 

Rating 
3 

Specific objectives (SOs) 
SO 1: Simplify the existing legal framework by removing regulatory overlaps and ensure that the 
Directive’s relevant provisions are included in the most adapted regulatory legislation(s)   
SO  2:  Ensure  that  consumers  purchasing  financial  services  at  distance  are  empowered  by 
effective and timely information 
SO 3: Ensure that consumers reflect on their purchases and exit unsuitable agreements for the 
provision of financial services  
SO 4: Prevent that consumers are nudged into purchasing financial services which are not in their 
best interest  
SO  5:  Reduce  barriers  for  providers  offering  financial  services  across  borders  while  enabling 
more choice for consumers  
The  only  positive  point  brought  by  Option  1  towards  achieving  the  initiative’s  specific 
objectives concerns the removal of the current regulatory overlaps. This is so since with the 
repeal of the Directive, there will no longer be any overlaps with sector-specific or horizontal 
EU  legislation.  However,  the  fact  that  product-specific  legislation  does  not  cover  in  all 
instances i) all financial services sold at distance (i.e a number of products – e.g gift cards under 
PSD II, or loans below EUR 200 from the Consumer Credit Directive - fall outside the scope 
of application of product specific legislation) and ii) all the rights provided in the DMFSD (no 

-2 

-1 

0 

87 The DMFSD evaluation study calculates that the net benefits of the DMFSD in the period 2004-2018 were on average 
3,7%  annually.  Based  on  stakeholders’  feedback,  to  each  policy  measure  is  assigned  a  rate  of  expected  increase  of 
effectiveness which contributes, in turn, to a reduction of consumer detriment. 

40 

 
 
 
                                                           
right  of  withdrawal  in  most  insurance  legislations)  means  that  the  complete  repeal  of  the 
DMFSD would lead to gaps in consumer protection, particularly with regard to the rights of 
pre-contractual information and right to withdrawal for certain financial services. The complete 
repeal would thus lower the level of consumer protection meaning that SO 2, SO 3 and SO 4 
would not be positively reached. The difference in marking between these three SO is explained 
by the fact that the right of withdrawal is still quite relevant for a number of financial services 
and  thus,  its  loss,  will  have  a  larger  impact.  In  addition,  there  are  currently  no  rules  that 
specifically address nudging, so its repeal will not lower current protection since there is no 
protection currently against this practice.  The repeal of the DMFSD will also entail the loss of 
the “safety net” feature, with the result that future financial services not covered by product-
specific  legislation  would  not  be  covered  by  the  obligations  relating  to  pre-contractual 
information and the right of withdrawal. The loss of the “safety net” will also lead to a possible 
unlevel playing field between regulated and non-regulated financial services88. This explains 
why SO 5 has also a rather negative scoring. The non-regulatory measures proposed will not 
mitigate the lowering of consumer protection since such information campaigns and guidelines 
will  not  significantly  impact  the  behaviours  of  providers  and  consumers.  According  to  the 
feedback gathered, some industry representatives are the only ones that believe that Option 1 
would be effective in addressing the identified problems since this option will eliminate the 
overlap issue between the Directive and the product-specific legislation. 

Coherence: 

In terms of coherence, Option 1 scores 2. In fact, repealing the DMFSD would have an overall 
positive impact since deleting it would eliminate the overlap between different legislative acts. 
However, the loss of the safety net feature for financial services bought at a distance lowers 
the level of consumer protection and thus renders this option not fully coherent with the goal 
set out in Article 169 of the Treaty on the Functioning of the EU (TFEU) and with EU policy 
objectives (“A Europe fit for the digital age”).  

Efficiency: 
Main category of impacts  
Consumer trust 
Consumer detriment 

Business compliance costs 

Member State costs  

One-off 
Recurrent 
One-off adaptation costs 
Recurrent enforcement costs 

Score 
-3 
-4 
0 
1 
0 
0 

Consumers: Repealing the DMFSD would be the most negative option for consumers both in 
terms of consumer trust and consumer detriment. Such option was the least popular one among 
consumers organisations in the survey run by the contractor working on the Support Study (all 
of  them  are  against  the  repeal  of  the  Directive,  since  it  would  lower  the  level  of  consumer 
protection,  repeal  the  safety  net  feature  and  reduce  consumer  trust  in  the  area  of  financial 

88 For instance, in insurance products, if the DMFSD is repealed, current products will be subject to pre-contractual 
information obligations stemming from the product-specific legislation and no longer subject to the right of withdrawal 
stemming  from  the  ‘repealed’  DMFSD.  Without  the  DMFSD,  newly  emerged  products  not  subject  to  any  product-
specific legislation will have no obligations to respect and would not offer any consumer rights. This creates an unlevel 
playing field between current and future financial services. 

41 

 
                                                           
services). More than half of the interviewed stakeholders believe that repeal of the DMFSD 
would  bring  detriment  to  consumers  both  for  current  and  future  products  since  repeal  will 
deprive them of basic consumer rights.  The partial  quantification performed for this impact 
assessment shows that a repeal would lead to around EUR 430 million in terms of consumer 
detriment89.  These  costs,  however,  could  be  somewhat  reduced  in  case  of  effective  self-
regulation of the industry (not monetised) or other non-regulatory measures. Repeal would also 
lead to loss of consumer trust since without the ex ante right to pre-contractual information and 
the ex-post right of withdrawal, consumers will contract less financial services at a distance.  

Businesses: Repealing the DMFSD would have an impact on financial services providers one 
off costs, since they would have to face a new regulatory framework, even though according 
to Member State consultation, there would not be an immediate repeal of the current national 
rules by all Member States. Nonetheless, over a period of 10 years, it may  be expected that 
Member States amend their legislation, and with no harmonised rules in the area for which the 
DMFSD applies today (e.g. right of withdrawal in insurance), the respective Member States 
might enact different new rules. On the other hand, the repeal would reduce costs in terms of 
communications to consumers which are higher because providers seem to send information 
twice to comply both with the DMFSD and with sector specific legislation. Hence, Option 1 
could entail a balance between costs and benefits for financial service providers with  costs for 
financial  services  providers  since  national  legislation  would  apply.  Option  1  would  have 
negative consequences on the cross-border trade since, as stated by industry representatives 
and  consumer  organisations,  repealing  the  DMFSD  would  decrease  consumer  trust  when 
purchasing financial services online. This would lead to lower uptake of cross-border trade in 
online financial services in the EU. The repeal of the DMFSD would also create an unlevel 
playing field with newly emerged products that would not be subject to any product-specific 
legislation since the latter would be free from any kind of regulation. Some financial services 
providers/associations support repealing the Directive to solve over-lap issue, and checking its 
relevance and coherence before introducing new or modernised rules. However, the complete 
repeal  is  strongly  opposed  by  those  financial  providers  and  business  associations  offering 
products whose product specific legislation does not cover all the rights of the DMFSD. They 
argue that safeguarding a basic level of consumer rights ensures trust and avoids legal gaps. 

Public  administration:  Repealing  the  DMFSD  would  have  no  immediate  impact  on  public 
administration  regarding  enforcement  and  adaptation  costs  respectively  since,  according  to 
Member State consultation, there would not be an immediate repeal of the current rules by all 
Member States. Nonetheless, over a period of 10 years, it may be expected that Member States 
amend  their  legislation  and  thereby  incurring  adaptation  costs  and  subsequent  enforcement 
costs.  In  the  consultation,  the  majority  of  public  authorities  have  consistently  held  that 
repealing the Directive would lower the level of consumer protection and deprive them of a 
piece of legislation that they still use for investigative and enforcement purposes. While public 
authorities have stated that the number of complaints concerning the Directive is low, they use 
it  as  a  top-up,  meaning  that  they  also  cite  its  provisions  alongside  other  relevant  product-
specific legislations when carrying out investigations.  Throughout the different consultation 

89 For more details see Annex 4. 

42 

 
                                                           
strands,  the  majority  of  public  authorities  and  the  scientific  researcher  participating  in  the 
public  consultation,  have  highlighted  that  technology  and  the  subsequent  appearance  of 
products  on  the  market  often  out-paces  the  legislative  process  and  thus  the  safety  net  was 
important for this purpose. 

The  “cost  of  non-Europe”  would  account  for  the  benefits  forgone  in  case  of  repeal  of  the 
DMFSD  in  comparison  with  the  alternative  policy  interventions.  In  case  of  repeal,  the 
regulatory framework would be simplified leading to a marginal reduced cost for businesses 
which could be considerable if compared to the increased costs of PO2 (EUR 190 million) or 
more  limited  in  comparison  to  PO3a  and  PO3b  (about  EUR  20  million).  Nevertheless,  the 
larger “cost of non-Europe” would be experienced by European consumers that would lose, in 
the long term, the opportunity to reduce their detriment (around EUR 140 and 250 million in 
10 years as per PO3(a), PO3(b) and PO2). 

6.2. Option 2: Comprehensive revision 

This option would address the initiative’s specific objectives related to the right to pre-contractual 
information and right to withdrawal in a very effective way. However, the impact of its measures on 
stakeholders would vary, from clearly positive for consumers, to negative for businesses (significant 
compliance  costs)  and  public  administrations  (enforcement  and  adaptation  costs).  Due  to  the 
comprehensive nature of the measures, the coherence with other legislations will not be improved 
when compared to the baseline. 

Rating 
-1 

Effectiveness:  
Specific objectives (SOs) 
SO 1: Simplify the existing legal framework by removing regulatory overlaps and ensure 
that  the  Directive’s  relevant  provisions  are  included  in  the  most  adapted  regulatory 
legislation(s)   
SO 2: Ensure that consumers purchasing  financial services at distance are empowered by 
effective and timely information 
SO 3: Ensure that consumers reflect on their purchases and exit unsuitable agreements for 
the provision of financial services  
SO 4: Prevent that consumers are nudged into purchasing financial services which are not in 
their best interest  
SO 5: Reduce barriers for providers offering financial services across borders while enabling 
more choice for consumers  
Option 2 would be particularly effective with regard to SO 2, SO 3 and SO 4 since the package 
of measures90  to  be introduced will  modernise the right  of withdrawal  and the right  to  pre-
contractual information and counter practices exploiting consumer biases. 

3 

4 

4 

4 

On the other hand,  this option  might  not  necessarily simplify the existing legal  framework. 
While  the  current  over-laps  will  be  clarified  through  a  hierarchical  provision91,  the  legal 
framework would not be simplified. The current Directive will remain in place. Its limited use 
by  a  number  of  public  authorities,  evidenced  by  the  low  number  of  complaints  and  limited 
documented case-law, together with the subsequent product-specific legislation, put in question 
its current relevance. Moreover, the addition of new provisions (e.g. robo-advice) to be applied 
horizontally  to  all  financial  services  might  not  be  sufficiently  future-proof  and  detailed, 

90 A standardised pre-contractual information form for all financial services, specify the timing for the provision of the 
key information, rules on robo-advice, ban on tying, standardised withdrawal form and standard rules on how to exercise 
withdrawal, the provision of basic products – see Section 5.2. 
91 I.e. if any provision of this Directive conflicts with a provision of another Union act governing specific sectors, the 
provision of that other Union act shall prevail and shall apply to those specific sectors. 

43 

 
                                                           
meaning  that  a  product-specific  legislation  might,  within  the  next  ten  years,  regulate  those 
aspects in a different more detailed way. This might cause unnecessary over-lap. 

However, Option 2 would safeguard the safety net feature of the Directive and thus ensure a 
level  playing  field  between  current  and  future  products  not  yet  subject  to  product-specific 
regulation. Its contribution to reducing barriers for cross-border provision of financial services 
through the creation of a more harmonised framework would be positive. However, the lack of 
simplification  of  the  existing  framework  could  have  the  knock-on  effect  of  creating  new 
barriers  to  the  provision  of  cross-border  financial  services  since  Member  States  might  not 
transpose the new rules consistently.  

Coherence: 

In  terms  of  coherence,  Option  2  scores  -1.  The  current  over-laps  with  product-specific 
legislation would be clarified through the hierarchy provision. However, some measures, for 
example  the  establishment  for  all  financial  services  the  obligation  to  have  a  standard 
information  form,  might  create  confusion  with  current  rules  already  found  in  the  product-
specific legislation (e.g. in the Payment Accounts Directive). Moreover, even if the safety net 
feature of the Directive would be kept, the numerous new additions to its framework, and the 
possibility that in the future product-specific legislation will also regulate the same issue (e.g. 
on robo-advice) might lead once again to over-lap issues.  

Efficiency: 

Main category of impacts 

Consumer trust 

Consumer detriment 

Business compliance costs 

Member State costs  

One-off 

Recurrent 

One-off adaptation costs 

Recurrent enforcement costs 

Score 

3 

3 

-3 

-2 

-1 

-2 

Consumers:  Consumer  trust  will  increase  through  the  package  of  measures  to  improve 
transparency and consumer understanding (e.g. standard document, timing of the provision of 
pre-contractual information). Consumer organisations tend to favour a comprehensive revision 
of  the  Directive,  as  the  improvements  Option  2  proposes  are  necessary  to  ensure  higher 
consumer  protection.  Indeed,  most  of  the  measures  mentioned  under  this  option  have  been 
mentioned by them in  the different  consultation  strands.  Such option  should lead to around 
EUR 260-300 million in terms of reduction of consumer detriment. 
Business: A comprehensive reform of the DMFSD would bring additional compliance costs to 
the financial service providers (one-off and recurrent) because of the new rules to be complied 
with.  In  fact,  the  measures  under  this  policy  option  would  require  service  providers  to 
familiarise themselves with new obligations (around EUR 90 million), adapt their IT systems 
(around EUR 52 million), train staff (around EUR 4 million), update their websites and update 
contracts  (around  EUR  60  million).  It  would  also  slightly  increase  costs  for  handling 
consumers’ complaints (around EUR 27 million). The complete revision of the DMFSD would 
also include measures on the use of robo-advice for companies, which was estimated to around 
EUR 35 million. During the stakeholder consultation activities, stakeholders from the financial 
services  industry  pointed  out  that  this  Option  would  generate  excessively  high  costs.  The 
comprehensive  reform  of  the  DMFSD  is  the  least  supported  option  by  financial  services 

44 

 
providers since they argue that the measures to be introduced under this option will outweigh 
the benefits. Thus, they did not favour this option since it would introduce disproportionate 
costs when compared to the benefits. According to the partial quantification exercise detailed 
in Annex 4, such option would entail around EUR 230 million in costs for businesses.  
Public administration:  Option  2 is generally not  supported  by national  authorities.  It would 
require them to spend additional resources on adaption and enforcement costs (at least around 
EUR 12 million).  

6.3. Option  3a:  Repeal  and  modernisation  of  relevant  provisions  introduced  in 

horizontal legislation 

This Option is effective in reaching the specific objectives, efficient, in particular for consumers, and 
ensures a high level of coherence. 

Effectiveness:  

4 

3 

3 

3 

Rating 
3 

Specific objectives (SOs) 
SO 1: Simplify the existing legal framework by removing regulatory overlaps and ensure that the 
Directive’s relevant provisions are included in the most adapted regulatory legislation(s) 
SO  2:  Ensure  that  consumers  purchasing  financial  services  at  distance  are  empowered  by 
effective and timely information 
SO 3: Ensure that consumers reflect on their purchases and exit unsuitable agreements for the 
provision of financial services  
SO 4: Prevent that consumers are nudged into purchasing financial services which are not in their 
best interest  
SO  5:  Reduce  barriers  for  providers  offering  financial  services  across  borders  while  enabling 
more choice for consumers  
In this option, the DMFSD will be repealed and the relevant provisions will be modernised and 
injected in the Consumer Rights Directive. Thus, this Option is effective in reducing regulatory 
overlaps, it will eliminate all the irrelevant articles and establish a clear hierarchical provision 
on the lines of Article 3(2) Consumer Rights Directive.  
The option would be effective in tackling SO 2, SO 3, SO 4 since the proposed measures92 will 
improve and modernise the current rights still exercised by consumers. The scoring for SO2 is 
higher because the majority of the proposed measures under this option address the information 
problem and are measures already laid down in the Consumer Rights Directive, meaning that 
financial service providers can benefit from the recent amendments and improvements to the 
Consumer Rights Directive. 
With regard to SO 5, this option is effective in the sense that since it conserves the safety net 
feature  it  ensures  a  level  playing  field  between  current  and  emerging  products.  The 
improvement  in  the  regulatory  framework  and  the  clarification,  through  the  hierarchical 
provision,  will  improve  legal  certainty  for  the  sale  of  financial  services  at  a  distance.  This, 
together  with  higher  harmonisation  (e.g.  thanks  to  measures  addressing  behavioural  biases) 
should then trigger more cross-border sales. 

Since  through  this  option  the  safety  net  will  be  safeguarded,  the  majority  of  consumer 
organisations, public authorities and half of the business associations expressed favour views 
in the validation workshop and scored positively in the survey run by the contractor working 
on the Support Study. 

92  Prohibition  of  default  choices,  adapting  presentation  of  information  to  different  distribution  channels,  improving 
clarity on when information should be presented to consumers, see Section 5.2. 

45 

 
                                                           
Coherence: 
In terms of coherence, Option 3a scores 4. In this option, all the suggested measures are similar 
to  provisions  found  predominantly  in  the  Consumer  Rights  Directive  and/or  other  financial 
services  legislations  or  proposed  legislation  such  as  the  Revision  of  the  Consumer  Credit 
Directive. The fact that the DMFSD will be repealed, thus one less legislation, and that the still 
relevant articles will be placed in another consumer horizontal legislation, ensures a high level 
of coherence. Moreover, the safety net feature for future financial services bought at a distance 
ensures coherence with EU policy objectives (“A Europe fit for the digital age”) and with the 
Article 169 TFEU. 

Efficiency: 

Main category of impacts 

Consumer trust 

Consumer detriment 

Business compliance costs 

Member State costs  

One-off 

Recurrent 

One-off adaptation costs 

Recurrent enforcement costs 

Score 

2 

3 

-1 

0 

0 

-1 

Consumers:  The  option  is  expected  to  overall  have  a  positive  effect  on  consumer  trust  by 
introducing  new  rules  on  how  and  when  information  should  be  presented  and  by  limiting 
practices exploiting patterns of behaviour such as using default options. For the same reasons, 
the option would have a positive effect on reducing consumer detriment (at least EUR 170-210 
million).  While  consumer  organisations  tend  to  prefer  a  comprehensive  revision,  at  the 
validation workshop they confirmed they can support a repeal of the Directive if the relevant 
parts  of  the  DMFSD  are  inserted  in  the  Consumer  Rights  Directive.  For  consumer 
organisations,  safeguarding  the  safety  net  feature  is  paramount.  However,  overlapping  with 
other legislation might create some legal uncertainty which could lower consumer trust. This 
explains the slight difference in score between consumer trust and consumer detriment. Taking 
everything into account, it is considered that the policy option would have a positive impact on 
consumers. 

Businesses: Adopting this policy option would incur additional one-off and recurring costs for 
businesses  since  measures  under  this  policy  option  would  require  service  providers  to 
familiarise themselves with the improved Consumer Rights Directive, adapt their IT systems, 
train  staff,  update  their  websites  and  update  contracts.  After  the  initial  implementation  of 
changes, the recurrent costs would be minor in comparison to a full revision of the DMFSD, 
since the complaint handling costs, which determine most of the recurrent costs for financial 
services, are accounted only in proportion of the relevance of the measures of the DMFSD to 
be merged in the horizontal legislation. In addition, this policy option does not include specific 
measures for robo-advice, decreasing the overall costs for companies. Adopting new rules for 
presenting pre-contractual information, removing pre-ticked boxes and updating contracts to 
include also the right of withdrawal mechanism would be done in the implementation phase. 
On the other hand, introducing more detailed rules on right to withdrawal could create more 
opportunities for consumers to submit complaints creating slightly higher costs for processing 
those  complaints.  However,  the  repeal  would  reduce  costs  in  terms  of  communications  to 

46 

 
consumers which are higher because providers seem to send information twice to comply both 
with the DMFSD and with sector specific legislation. This would balance one off and recurring 
costs. According to the partial quantification exercise detailed in Annex 4, such option would 
entail around EUR 19 million in costs for businesses. This option would also lead to higher 
cross-border trade. 

Public authorities: This option would introduce some one-off and recurrent costs for national 
authorities  (at  least  around  EUR  6  million).  Authorities  would  bear  some  transposition  and 
implementation costs during the adoption phase, but the burdens would be low since the new 
provisions are minimal. Furthermore, additional monitoring and enforcement costs would be 
incurred due to introduction of new rules such as prohibition of default options (e.g. pre-ticked 
boxes)  and  adaptation  of  presentational  rules  for  different  distribution  channels.  Public 
authorities support modernising the current text concerning pre-contractual information. Public 
authorities  also  stated  that  they  are  familiar  with  the  Consumer  Rights  Directive  and 
incorporating parts of the DMFSD into the former would not be excessively complicated.  

6.4. Option  3b:  Repeal  and  modernisation  of  relevant  provisions  introduced  in 

product-specific legislation 

This option is effective in reaching the specific objectives, efficient in particular for public authorities 
and financial service providers and ensures a high level of coherence. Its drawback is the loss of the 
safety net feature. 

Effectiveness:  

2 

2 

3 

Rating 
3 

Specific objectives (SOs) 
SO 1: Simplify the existing legal framework by removing regulatory overlaps and ensure that the 
Directive’s relevant provisions are included in the most adapted regulatory legislation(s) 
SO  2:  Ensure  that  consumers  purchasing  financial  services  at  distance  are  empowered  by 
effective and timely information 
SO 3: Ensure that consumers reflect on their purchases and exit unsuitable agreements for the 
provision of financial services  
SO 4: Prevent that consumers are nudged into purchasing financial services which are not in their 
best interest  
SO  5:  Reduce  barriers  for  providers  offering  financial  services  across  borders  while  enabling 
more choice for consumers  
Option 3b envisages the repeal of the DMFSD and the injection of the still relevant articles into 
the  different  product-specific  legislation.  Therefore,  the  current  regulatory  overlaps  will  be 
eliminated  and  the  legal  framework  would  be  simpler  and  clearer  for  stakeholders.  Thus  it 
scores high vis-à-vis SO 1. The drawback of this option is that, by repealing the DMFSD, and 
not inserting it in another horizontal legislation, the safety net is lost, for both current products 
exempted from sector specific legislation and for new unregulated financial services. This loss 
of the safety net means that this option is moderately effective vis-à-vis SO 2, 3, 4 since, while, 
it modernises the still relevant rights which will be injected in the different product-specific 
legislation, it does not provide consumers with protection for products currently not covered 
by product specific legislation (e.g. credits below EUR 200) or if a new unregulated financial 
service  appears  on  the  market.  SO  2  scores  a  point  higher  than  SO  3  and  SO  4  since  the 
proposed measures under this option to address the information problem are more robust when 
compared to the measures proposed for SO 3 and SO 4.  

2 

47 

 
This option has the potential to somewhat facilitate cross-border trade by removing regulatory 
overlaps. However, the loss of the safety net features entails risks to the cross-border provision 
since  new  products  not  subject  to  product-specific  legislation  would  be  unregulated.  This 
would create an uneven playing field with current regulated products. 

Coherence:  

In terms of coherence, Option 3b scores 3. This option would eliminate overlaps between the 
DMFSD  and  product-specific  legislation.  However,  the  loss  of  the  safety  net  feature  for 
financial  services  bought  at  a  distance  lowers  the  level  of  consumer  protection  for  future 
financial services which would not be captured by product-specific legislation. Thus renders 
this option not fully coherent with the goal set out in Article 169 TFEU and with EU policy 
objectives (“A Europe fit for the digital age”). 

Efficiency: 

Main category of impacts 

Consumer trust 

Consumer detriment 

Business compliance costs 

Member State costs  

One-off 

Recurrent 

One-off adaptation costs 

Recurrent enforcement costs 

Score 

1 

2 

-1 

0 

0 

-1 

Consumers: This option is expected to have an overall positive effect on consumer trust by 
introducing new rules for businesses on how and when information should be presented and 
by limiting practices exploiting patterns of behaviour such as using default options. For the 
same reasons, the option would have a positive effect on reducing consumer detriment (around 
EUR 130-160 million), but to a lesser extent compared to Option 3a because consumers buying 
financial services at a distance currently not covered by sector specific legislation might face 
detriment.  Consumer  association  and  some  Member  States  participating  in  the  validation 
workshop argue that the benefits brought by these improvements to the right to pre-contractual 
information  and  right  to  withdraw  would  be  offset  by  loss  of  the  safety  net.  The  overall 
efficiency scores for both consumer trust and consumer detriment were lowered to reflect this 
fact. 

Businesses: Adopting this option would incur one-off and recurrent costs for businesses in line 
with those mentioned for Option 3a. On the other hand, the repeal would reduce recurrent costs 
in terms of communications to consumers which are higher because providers seem to send 
information twice to comply both with the DMFSD and with sector specific legislation. The 
net costs for financial services providers would be at least around EUR 39 million. Business 
associations and financial providers who still relay on the DMFSD with regards to the right of 
withdrawal and to a certain extent the right to pre-contractual information (because product 
specific legislation does not cover them), would support the repeal of the Directive but ensuring 
that the consumer rights are modernised and introduced in product-specific legislation. 

Public  administration:  This  option  would  introduce  some  one-off  and  recurrent  costs  for 
national authorities (at least around EUR 6 million). Authorities would bear some transposition 
and implementation costs during the adoption phase, but the burdens would be low since the 

48 

 
new  provisions  would  be  merged  into  existing  vertical  legislation.  Furthermore,  additional 
monitoring and enforcement costs would be incurred due to introduction of new rules such as 
prohibition of default options (e.g., pre-ticked boxes) and adaptation of presentational rules for 
different distribution channels 

7.  HOW DO THE OPTIONS COMPARE? 

This  section  compares  the  performance  of  the  five  policy  options  considered,  based  on  the 
elements developed in Section 6. 

7.1. Effectiveness 

The considered policy options would achieve specific objectives to different extents.  

Table 4. Effectiveness (from -5 i.e. very low effectiveness to 5 i.e. very high effectiveness) 

Specific Objectives 
(SO) 

Option 0 
(Baseline) 

Option 1  

Option 2  

Option 3a  

Option 3b  

SO 1  

SO 2  

SO 3  

SO 4  

SO 5:  

0 

0 

0 

0 

0 

3 

-1 

-2 

0 

-1 

-1 

4 

4 

4 

3 

3 

4 

3 

3 

3 

3 

3 

2 

2 

2 

Since all the specific objectives are equally important,  it was decided not to differentiate in 
terms of weighting. The combination of all five specific objectives would lead to benefits for 
stakeholders.  

According to our analysis, Option 3a scores best in terms of effectiveness. 

In terms of the specific objectives related directly to the provisions providing consumers with 
rights (SO 2, SO 3, SO 4) Option 2 scores highest, followed by Option 3a (which scores equal 
to  Option  2  as  regards  SO2  because  of  the  breadth  of  the  measures  it  entails  to  tackle  the 
information problem). This is the result of the fact that Option 2 provides a larger number of 
measures to modernise the right of withdrawal and better addresses new practices exploiting 
consumer biases. While Option 3a and 3b contain the same measures, the safety net feature is 
lost in Option 3b. Hence, Option 3b scores a bit lower than Policy Option 3a for SO 2, 3, 4. 
The repeal of the Directive (Option 1) would lower the consumer protection currently provided 
by the DMFSD, since, as explained in Section 2, it still is relevant for certain financial services. 
Repeal will also mean that there is no safety net feature for financial services. 

The loss of the safety net feature also explains the difference between the score of SO 5 between 
Option 3a and 3b. In fact, its loss entails risks to the cross-border provision since, as highlighted 
by stakeholders, products currently not covered by sector specific legislation or new products 
not subject to product-specific legislation would be unregulated. This would create an uneven 
playing  field  with  current  regulated  products.  The  repeal  of  the  Directive  envisaged  under 
Option 1 would create harmonisation gaps which would have also an indirect effect on cross-
border trade: consumers would feel less certain regarding own rights in purchasing financial 
services from cross-border provider. Option 2 and 3 are moderately effective to reduce barriers 
since they will increase consumer trust. 

49 

 
However,  while  Option  2  will  indeed  increase  consumer  trust,  since  it  will  include  a  large 
number of new provisions crossing across all financial services (e.g. rules on robo-advice) it 
will  not  simplify  the  current  framework  (SO  1).  Option  2  will  entail  a  large  number  of 
provisions. Some of its measures, for example the burden for all financial services to provide 
a standard information form, might create confusion with current rules already found in the 
product-specific  legislation  (e.g.  in  PAD).  Moreover,  the  numerous  new  additions  to  its 
framework, and the possibility that in the future product-specific legislation will also regulate 
the same issue (e.g. on robo-advice) might lead once again to over-lap issues. On the other 
hand, the repeal of the Directive will eliminate any possible overlaps. The difference between 
Option 3a and 3b with regards to SO1 is that, while the former will reduce the current overlap 
through the inclusion of a clear hierarchical provision clearly explaining the lex specialis/lex 
generalis situation, it will reduce and not eliminate potential overlaps. In Option 3b, the issue 
of overlapping is eliminated. 

7.2. Coherence with other EU legislation and policy objectives 

Each  option’s  coherence  with  other  EU  legislation  and  EU  policy  objectives,  including  the 
Treaty (TFEU) and with other policy initiatives and instruments, has been assessed based on a 
thorough legal analysis. Considerations about legal clarity have also be taken into account. 

Table 5. Coherence (from 0 i.e. no change to the level of legal coherence to 5 i.e. increase of 
EU legal coherence to a very great extent)   

Option 0 (Baseline)  Option 1 

Option 2 

Option 3a 

Option 3b 

0 

2 

-1 

4 

3 

Improving the Directive’s  coherence is  one of the  key issues of the initiative. Addressing 
problem 1 (lack of coherence and decreased relevance) and the related problem driver (over-
lap  and  vague  terms)  is  of  fundamental  importance  for  all  stakeholders.  In  this  light,  the 
coherence criteria is very important for this Impact Assessment. 

Under the coherence criteria, Option 3a scores best since it will establish a clear hierarchical 
norm to regulate the issue of over-laps with product specific legislations, proposes measures 
that are similar to provisions found predominantly in the Consumer Rights Directive and/or 
other financial services legislations or current Commission proposal, and safeguards the safety 
net feature. The loss of the safety net feature in Option 3b and Option 1 means that consumers 
would be deprived of their rights with regard to financial services bought at a distance which 
are  not  captured  by  product-specific  legislation.  This  fact  renders  these  options  not  fully 
coherent with the goal set out in Article 169 TFEUand the Commission’s priority to ensure a 
‘Europe fit for the digital age’. However, Option 1 and 3b score differently because the latter 
would ensure higher coherence with the goal of Article 169 TFEU. Option 2 scores slightly 
negatively because even though it would keep the safety net feature, apart from the introduction 
of a hierarchical norm, it would perpetuate the current concerns and issues with the DMFSD’s 
framework.  

7.3. Efficiency 

In order to assess the efficiency of the options, a partial quantitative assessment was carried 
out, based on the analysis of the monetisable impacts and of a selection of policy measures for 
which  enough  quantitative  evidence  was  gathered.  The  partial  quantification  was 

50 

 
complemented with the opinions of stakeholders participating to the interviews, surveys and 
workshop in order to get the final assessment of the efficiency of the options.  

Partial quantification 

This  table  presents  the  costs/benefits  for  stakeholders  for  each  option  (see  Annex  4  for  a 
detailed breakdown). The quantitative assessment assumes a range of increased effectiveness 
of the individual policy measures: a small increase in effectiveness (lower bound) and a higher 
increase in effectiveness (higher bound).  

Table 6. Partial quantification exercise (EUR million) – costs in parenthesis 

Policy 
Option 1 

Policy 
Option 2 

Policy 
Option 3a 

Policy 
Option 3b 

 Public Authorities (PA) 

Total one-off costs for PA 

Total recurrent costs for PA 

Total costs for PA (A) 

Financial Services providers (FS) 

Total one-off costs for FS 

Total recurring costs for FS 

Total costs for FS  
Total benefits93 for FS (reduced recurrent 
communications to consumers) 
Net costs for FS (B) 

Consumers 

Consumer detriment (C) 

Total consumer benefits (lower bound) (D) 

Total consumer benefits (higher bound) (E) 

0,0 

0,0 

0,0 

(1,6) 

(10,2) 

(11,8) 

(90,3) 

(206,7) 

0,0 

(90,3) 

97,7 

(62,3) 

(269,0) 

0,0 

(0,8) 

(5,1) 

(5,9) 

(103,4) 

(13,7) 

(117,0) 

97,7 

(0,8) 

(5,1) 

(5,9) 

(103,4) 

(13,7) 

(117,0) 

97,7 

(7,4) 

(269) 

(19,3) 

(19,3) 

(559,7) 

42 

48 

258 

297 

(23) 

198 

231 

173 

179 

208 

153 

Total estimates (lower bound) (A+B+C+D) 

(510) 

16 

206 

183 

(504) 

Total estimates (higher bound) (A+B+C+E) 
Each  policy  option  would  generate  costs  and  benefits  for  the  different  categories  of 
stakeholders. However, as shown in the table above, the costs for Policy Options 3a and 3b for 
Public Authorities  and  for  Financial  Service  providers  are  estimated  to  be  the  same.  This 
similarity is due to the fact that the same measures are foreseen for both options; however, what 
differs is the way of how to inject the relevant provisions of the DMFSD, namely through a 
horizontal  instrument  (Option  3a)  or  in  the  product  specific  legislation  (Option  3b).  Such 
different approach in the implementation should have an effect on consumers’ protection since, 
as previously mentioned,  only  a horizontal implementation would maintain the  “safety net” 
role of the EU regulatory approach. 
In particular: 

  Option 1: Repeal of the DMFSD – this policy option would generate a total cost estimated 
above  500  Million  euros  in  consumer  detriment  as  a  result  of  the  loss  of  the  expected 
benefits of the DMFSD (baseline). These costs could be reduced in case of effective self-

93 In terms of reduced recurrent communications with consumers. 

51 

 
  
  
  
  
                                                           
regulation  of  the  industry  (not  monetised)  or  increase  in  case  of  national  law  to  reduce 
consumer protection due to the absence of the DMFSD at EU level. 

  Option 2: Improve the DMFSD based on identified issues (Comprehensive revision) – 
this policy option, according to our calculations, would generate a positive net benefit in 
the  period  2022-2031.  This  option  foresees  an  increased  burden  for  financial  services 
providers, which should be compensated by the increase of consumer protection. This small 
positive net benefit calculated in our estimates, however, could easily also be a negative net 
cost in case of slightly higher costs for businesses or lower benefits for consumers. 

  Options  3(a)  and  3(b):  Repeal,  modernisation  of  relevant  provisions  introduced  in 
horizontal legislation – these policy options are the most balanced in terms of efficiency 
amongst  the  ones  taken  into  consideration. According  to  the  monetised  impacts,  these 
options  would  generate  a  moderate  level  of  costs  for  public  authorities  and  financial 
services  while  bringing  a  relatively  high  reduction  of  consumer  detriment  generating  a 
positive net benefit in the period taken into account. However, while Option 3a foresees 
the integration of the measures of the DMFSD still relevant into a horizontal legislation 
(i.e. the Consumer Rights Directive), which would apply also to financial services currently 
not covered by specific legislation (e.g. gift cards), Option 3b foresees the integration of 
these  measures  in  each  product  specific  legislation  which  would  allow  for  a  standard 
protection for consumers only for already covered financial products. Hence, the benefits 
for policy option 3(b) have been accounted not fully (at 90% of their value) to take into 
account  of  the  absence  of  the  “safety  net”  feature  of  the  DMFSD  or  that  a  horizontal 
consumer protection legislation would bring. 

Qualitative assessment 
The  results  of  the  qualitative  assessment  build  on  stakeholders’  views  in  the  various 
consultations and takes into account the results of the quantitative estimates.  
Table 7. Efficiency (from -5 i.e. very negative impact to 5 i.e. very positive impact)   
Option 0 
(Baseline) 

Option 2  Option 3a  Option 3b 

Option 1 

Impacts 

Financial 
Service 
Providers 

Compliance costs: 
one-off costs 
Compliance costs: 
recurrent costs 
Consumers  Consumer trust 

Public 
authorities 

Reduction in 
consumer 
detriment 
Adaptation costs: 
one-off costs 
Enforcement costs: 
recurrent costs 

0 

0 

0 

0 

0 

0 

0 

1 

-3 

-4 

0 

0 

-3 

-2 

3 

3 

-1 

-2 

-1 

0 

2 

3 

0 

-1 

-1 

0 

1 

2 

0 

-1 

Based  on  the  magnitude  of  the  impacts,  the  main  ones  to  be  looked  at  are  the  reduction  in 
consumer detriment and one off and recurrent costs for financial services providers. 

Comparing  those  categories  of  costs  and  benefits,  the  best  performing  option  is  Option  3a. 
Option 3a scores a higher value also looking at other impacts. It would ensure positive outcome 
for consumers and not entail excessive costs. It is differentiated from Option 3b because of the 
importance of maintaining a “safety net” for consumers. 

52 

 
 
In particular, stakeholders see positively the role of “safety net” of the DMFSD which would 
be kept only for Options 2 and 3a. However, in case of complete revision of the DMFSD with 
the addition of measures aimed at increasing consumer protection, the benefits for consumers 
are counterbalanced by the higher expected costs for financial service providers. 

7.4. Comparison of options and proportionality 

To compare the options  we looked at  the best  performing one for each of the three criteria 
considered.  It  was  decided  not  to  attribute  different  weightings  to  the  criteria,  because  we 
consider they were all equally important. The coherence criteria is as much relevant as the other 
two in this impact assessment, considering the decreased relevance of the DMFSD because of 
the introduction of product specific and horizontal legislation. In addition, Option 3a scores 
best under all three criteria and thus the attribution of different weightings would not have had 
any impact. 

Table 8. Ranking of policy options (from 1= better performing to 4=worst performing) 

Assessment 

Option 1  Option  1,  through  the  repeal  of  the  Directive,  will  eliminate  the  current  over-lap  between  the 
DMFSD and product-specific legislation, thereby simplifying the existing legislative framework 
and,  at  the  same  time,  ensuring  a  moderate  level  of  ‘coherence’.  However,  this  option  scores 
poorly  under  effectiveness  and  efficiency  since  it  would  lead  to  the  lowering  of  consumer 
protection and opens the way for possible uneven level playing field between current products and 
future products due to the loss of the safety net feature. 
Effectiveness: 4th | Efficiency: 4th | Coherence: 3rd  

Option 2  Option 2 would address the initiative’s specific objectives related to the right to pre-contractual 
information, the right to withdrawal and practices exploiting behavioural biases in a very effective 
way. However, in terms of efficiency, the impact of its  measures on  stakeholders  would vary, 
from clearly positive for consumers, to seriously negative for businesses (significant compliance 
costs) and public administrations (enforcement and adaptation costs). Due to the comprehensive 
nature of the measures, the coherence with other legislations will not be improved when compared 
to the baseline. 
Effectiveness: 2nd | Efficiency: 3rd | Coherence: 4th 

Option 3a  Option  3a  comes  first  in  all  of  the  three  criteria.  It  is  very  effective  in  reaching  the  specific 

objectives, efficient, and ensures a high level of coherence. 
Effectiveness: 1st  | Efficiency: 1st | Coherence: 1st  

Option 3b  Option 3b is effective in reaching the specific objective of simplifying the legislative framework 
since it will result in the repeal of the Directive, and quite effective in reaching the others. It is 
efficient and ensures a high level of coherence. Its drawback is the loss of the safety net feature. 
Effectiveness: 3rd | Efficiency: 2nd  | Coherence: 2nd  

Ranking 
4 

3 

1 

2 

The  performed  analysis  highlights  that  Option  3a  ranks  first  in  all  three  criteria.  The 
legislative  technique  proposed  for  Option  3a  safeguards  the  ‘safety  net’  feature  which 
stakeholders from all sectors believe is useful and helpful. In fact, the safeguarding of the safety 
net allows Option 3a to ensure more coherence with other EU legislation and policy in a wider 
sense. Option 3a will not eliminate completely possible overlaps; however, through the deletion 
of  most  of  the  current  provisions  and,  proposing  the  modernisation  of  two  fundamental 
consumer rights i.e. right to pre-contractual information and right of withdrawal, and the clear 
hierarchical norm specifying the lex specialis/lex generalis relationship between the Directive 
and product-specific legislation, it will bring more legal certainty and legal clarity compared 
to  base-line.  The  cost  of  the  measures  proposed  for  financial  service  providers  and  public 

53 

 
 
authorities on the basis of the partial quantification conducted, should be limited; the option 
should result in a net benefit for consumers and lead to increased cross-border trade. 

In accordance with the principle of  proportionality, the proposed rules  will not go beyond 
what is necessary in order to achieve the objectives set out in Section 4. While it might seem 
logical that the Option 1 (repeal and introduction of non-regulatory measures) would respect 
best the principles of proportionality and subsidiarity, when taking into consideration the cost 
of non-Europe, the result is that this option is the least effective and least efficient. The initiative 
will cover only the aspects  that Member States  cannot  achieve on their  own and where the 
administrative burden and costs are commensurate with the specific and general objectives to 
be achieved.  

As such, proportionality will be embedded in the provisions of the Directive. The measures 
proposed under Options 3a are minimal and are already found in other legislations or in the 
Commission  proposal  revising  the  Consumer  Credit  Directive.  Considering  the  current  and 
future level of relevance of the Directive, the minimalist approach to modernisation respects 
the principle of proportionality.  

8.  PREFERRED OPTION 

8.1. Option  3a:  Repeal  and  modernisation  of  relevant  provisions  introduced  in 

horizontal legislation  

Based  on  our  analysis  and  explanation  above,  the  preferred  option  is  3a  -  Repeal, 
modernisation of relevant rights injected in horizontal legislation, namely the Consumer 
Rights  Directive  (CRD).  This  policy  option  tackles  the  three  identified  problems  and 
addresses the objectives  in  the most effective,  efficient  and proportionate  way.  Moreover it 
ensures  a  high  level  of  coherence.  The  proposed  legal  intervention  sanitizes  the  current 
framework  by  repealing  the  provisions  that  have  lost  relevance,  modernising  the  relevant 
consumer rights concerning the right to pre-contractual information and the right of withdrawal 
and  injecting  them  into  the  CRD.  Certain  articles  of  the  CRD  will  also  extend  to  distance 
marketing of financial services. In so doing, the minimalist approach to this legal revision 
ensures a high level of consumer protection, renders the relevant rights fit for the digital 
age, and safeguards, as requested by all stakeholders, the safety net feature for possible 
future emerging products. 

This preferred option will lead to the repeal of the current legislation without the creation 
of a new legal instrument. The CRD was chosen as the appropriate instrument since, similar 
to the DMFSD, it provides horizontal consumer rights and rules. Thus, injecting the DMFSD 
relevant rights in the Consumer  Rights Directive  ensures that the safety net feature is 
safeguarded.  The  Consumer  Rights  Directive,  whilst  as  of  today  excludes  from  its  scope 
‘financial services’, already provides for the right to pre-contractual information and the right 
of withdrawal; thus, applying these two rights to financial services within the CRD will fit well. 
Special  attention  will  be  provided,  on  the  one  hand,  to  ensure  the  required  specificity  of 
financial services, and on the other hand, to ensure that the CRD is not rendered too complex. 
The best way to proceed would be align, as far as possible, rules already laid down in the CRD 
to financial services. When this is not possible, and in an effort not to render the current CRD 
framework unnecessarily complex, a dedicated chapter to financial services will be added to 

54 

 
the CRD. This added chapter will concern only financial services and will not extend to the 
current CRD rules  concerning other services and goods.  A review of this methodology will 
take place in line with the standard period for normal legislative proposals, thus within 5 years. 
It  is  also  worth  keeping  in  mind  that  the  recent  Commission  Proposal94  on  empowering 
consumers for the green transition also proposes to amend the CRD. Thus, the objective is to 
carry out the review within the same time-line. 

The  preferred  option  is  deemed  to  be  effective  in  tackling  the  problems  identified  and  in 
achieving the initiative’s objectives. 

  The repeal of the DMFSD itself, the inclusion of a clear hierarchical norm explaining 
the lex generalis/lex specialis relationship (already set out in a clear manner in Article 3(2) 
of  the  CRD)  and  the  injection  of  the  still  relevant  rights  in  the  Consumer  Rights 
Directive will simplify the existing legal framework by removing regulatory overlaps and 
ensure that the Directive’s relevant provisions are included in the most adapted regulatory 
legislation (SO1). This course of action will also ensure a level playing field for financial 
services providers across borders while enabling more choice for consumers (SO 5) since 
the safety net is kept, thereby subjecting emerging products to EU legislation. 

  The modernisation of the still relevant right to pre-contractual information and the 

right to withdrawal through: 
o 

o 

o 

the updating of the provision setting out the required content of information to be 
included by the provider at the pre-contractual stage, for instance the inclusion of 
the email address which is missing from the current DMFSD; 
the requirement that the pre-contractual information to be provided to the consumer 
is adapted to the channel on which it is displayed; 
the requirement that the pre-contractual information is to be provided at least 24 
hours before the actual signature of the financial service, and, if signed within less 
than 24 hours, an obligation on the financial provider to inform the consumer of 
the right to withdraw from the contract; 

It  will  ensure  that  consumers  purchasing  financial  services  at  distance  are  empowered  by 
effective and timely information (SO 2) and that consumers reflect on their purchases and exit 
unsuitable agreements for the provision of financial services (SO 3). 
The  prohibition  of  default  options  such  as  pre-ticked  boxes  will  prevent  consumers  from 
being nudged into purchasing financial services which are not in their best interest (SO 4). 
The above described measures are all measures which are similar to measures already found 
in current legislation or in legislative proposals. The updating of the content to be provided at 
pre-contractual  stage  corresponds  to  what  is  already  found  in  Article  6  (Information 
requirements  for  distance  and  off-premises  contracts)  of  the  Consumer  Rights  Directive. 
Adapting information to the channel corresponds to Article 8 (Formal requirements for distance 
contracts) of the Consumer Rights Directive. And the timing of pre-contractual information 
coupled  possibly  with  a  reminder  of  a  right  of  withdrawal  corresponds  to  Article  10  (Pre-
contractual information) of the Commission Proposal to revise the Consumer Credit Directive. 

94  

55 

 
                                                           
This  minimalist  approach  to  modernising  the  current  relevant  DMFSD  rights  and  the 
inclusion of a clear hierarchical provision ensure that the coherence with other EU relevant 
legislations and policies will be improved. 
Since the preferred option repeals the DMFSD, injects the still relevant parts in the Consumer 
Rights Directive, and safeguards the safety net feature, the protection of consumers granting 
credit through peer-to-peer lending platforms is not addressed by this initiative. This issue is 
too specific to fit the logic of the proposal and the horizontal nature of the Directive. 
Option 3a would also have a positive effect on the reduction of consumer detriment (at least 
EUR 170-210 million) and on consumer trust. It would entail some costs for financial services 
providers (at least around EUR 19 million) and for public authorities (at least around EUR 6 
million). 

8.2. REFIT (simplification and improved efficiency) 

The review of the Directive was included among the Adjusted Commission Work Programme 
REFIT  initiative  2020.95  In  this  context,  the  report  has  analysed  how  the  current  legal 
framework could be simplified, improve the efficiency and decrease administrative burden, in 
line with the Better Regulation rules and guidelines. The following actions under Option 3a 
should lead to such higher efficiencies: 

Table 9. REFIT Cost Savings – Preferred Option 3a 

Description 

into 

injected 

The repeal of the Directive ensures 
that  the  non-relevant  articles  (e.g. 
ban on unsolicited communications) 
the 
will  not  be 
Consumer  Rights  Directive.  This 
will  reduce  the  number  of  articles 
that need to be complied with. 
A  hierarchical  provision,  on  the 
basis of  Article 3(2) (Scope) of the 
Consumer  Rights  Directive,  will 
regulate  the  overlap  issue  between 
the  Directive  and  product-specific 
legislation.  This  provision  will 
legislation  applies 
clarify  which 
through 
generalis/lex 
lex 
the 
specialis norm. 

Amount 

Approximately 
EUR 97,7 
million in 
savings linked 
to reduced 
communication
s to consumers 
because the 
overlap with 
sector specific 
legislation 
would be 
clarified. 

Comments 

These  two  actions  will  simplify  the  legislative  framework, 
thereby improving efficiency and reducing regulatory costs for 
financial service providers and public authorities. 
Concretely, for financial service providers, this simplification 
translates,  in  the  arch  of  the  period  2022-2031,  into  less 
administrative  burden  thanks  to  a  clearer  application  of  the 
legislation,  less  costly  compliance  activities,  lower  need  of 
specialized legal support to ensure that the revised practices are 
in line with the new legislation and, possibly, a lower number 
of consumer complaints to deal with. 
For  public  administrations,  the  higher  degree  of  legal  clarity 
and  the  simplified  regulatory  framework  applicable  to  the 
distance  marketing  of  financial  services  should  lead  to  a 
reduction of the issues faced by consumers (which as of 2018, 
ranged  between  4%  and  8%  of  the  financial  services 
purchased) and thus proportionally decreasing the number of 
complaints. 
Consumers  too  will  benefit  from  such  simplification  (for 
instance, due to the current overlap, certain financial providers 
present  consumers  with 
two  sets  of  pre-contractual 
information,  one  based  on  the  DMFSD,  one  based  on  the 
product-specific legislation. Through Option 3a, this should no 
longer take place). 

Approximately 
EUR 40 million 

Clearer regulatory framework 
leading to increase of cross-border 
provision of financial services  and 
increased consumer choice 
Beyond  these  simplifications  and  higher  efficiencies,  this  initiative  endeavours  to  keep 
regulatory burdens to the minimum necessary both for businesses and Member States to what 

A  harmonised  regulatory  framework  would  lead  to  higher 
consumer trust and to an increase of the number of consumers 
that purchase at better conditions from non-national providers. 

95 Annexes to the Adjusted Commission Work Programme 2020, Brussels, 27.5.2020 COM(2020) 440 final.  

56 

 
                                                           
is  strictly  needed  to  ensure  a  high  level  of  consumer  protection  and  foster  the  provision  of 
cross-border financial services. Option 3a proposes measures that are similar to measures in 
other  legislative  texts  or  legislative  proposals  and  are  limited  in  number.  The  costs  to  be 
incurred by financial providers and public authorities are mostly one-off costs which will be 
be compensated by larger long-term benefits. For instance, the burden reduction of adapting 
information  requirements  for  digital  use  has  an  initial  cost  but  once  these  have  been 
prepared,  it  could  be  less  burdensome  to  provide  these  online.  Just  for  the  consumer  credit 
sector, the Impact Assessment accompanying the revision of the Consumer Credit Directive 
held that the burden reduction could ultimately impact over 25 million personal bank loans 
annually bought at a distance. 
In conclusion, all the ongoing work related to financial services under other initiatives has been 
and will be duly taken into account to avoid overlaps and overregulation. 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 
The Commission will monitor the implementation of the preferred policy option, i.e. the repeal 
of  the  DMFSD  and  the  modernisation  of  its  relevant  provisions  injected  in  horizontal 
legislation,  if  adopted  and  in  line  with  the  specific  objectives  identified  in  this  Impact 
Assessment. Table 10 presents a list of monitoring indicators that will help evaluating whether 
the preferred policy option is successful in achieving these specific objectives. These indicators 
will then serve as a basis for the next evaluation that should be presented at the latest five years 
after the entry into force of the present initiative.  
The draft proposal will contain a commitment to evaluate the impacts of the new legislative 
act. The Commission will start monitoring the implementation of the preferred policy option 
after the entry into force of the initiative.  
Table 10. Monitoring indicators for the specific objectives 

SOs  Monitoring indicators 

Data sources 

SO1  

■  Number/proportion of relevant DMFSD 

provisions modernised 

■  Legal analysis 
■  Member States experts on the 

■  Number/proportion of relevant DMFSD 

DMFSD 

provisions injected in the CRD 

SO2  

■  Number/proportion of consumers who 

deem they were provided with effective 
and timely information on purchased 
product 

■  Number/share of consumer complaints 
associated with information in distance 
purchases of financial services 

■  Enforcement authorities/CPC 
■  Stakeholder surveys/interviews  
■  Consumer and creditor surveys 
■  Mystery shopping exercises (e.g. 

through EBA) 

■  Member States experts on the 

DMFSD 

SO3  

■  Number of reminders on the possibility to 
exercise the right of withdrawal sent by 
the financial services providers to the 
consumer per agreement 

■  Enforcement authorities/CPC 
■  Stakeholder surveys/interviews  
■  Consumer and creditor surveys 
■  Mystery shopping exercises (e.g. 

■  Number/share of consumers who used 

through EBA) 

their right of withdrawal to exit unsuitable 
agreements 

■  Number/share of consumer complaints 

associated with the right of withdrawal in 
distance purchases of financial services 

■  Member States experts on the 

DMFSD 

Actors responsible 
for data collection 
■  European 

Commission 
■  Member States 

■  European 

Commission 
■  Member States 

■  European 

Commission 
■  Member States 

57 

 
SO4  

■  Level of consumers’ trust in distance 
purchases of financial services 

■  Number/share of consumer complaints 
associated with practices exploiting 
consumer biases in distance purchases of 
financial services 

SO5  

■  Number/proportion of cross-border 

distance purchases of financial services 

■  Number/type(s) of products financial 

services providers offer as part of distance 
purchases of financial services 

■  Enforcement authorities/CPC 
■  Stakeholder surveys/interviews  
■  Consumer surveys 
■  Mystery shopping exercises (e.g. 

through EBA) 

■  European 

Commission 
■  Member States 

■  Market studies 
■  Eurobarometer 

■  European 

Commission 

58 

 
 
 
 
ANNEXES 

59 

 
 
 
ANNEX 1: PROCEDURAL INFORMATION 

1)  Lead DG, DEcide Planning/CWP references 

  LEAD DG: DG JUSTICE AND CONSUMERS 
  DECIDE PLANNING: PLAN/2020/7021 
  CWP 2020 - ANNEX II (REFIT INITIATIVE NO. 43)96 

2)  Organisation and timing 

The  impact  assessment  took  place  between  March  2021  and  November  2021  and  was 
announced  in  the  2020  Commission  Work  Programme  –  Annex  II  Refit  Initiatives.  It  was 
carried out by Unit E1 "Consumer Policy" of the Commission, DG Justice and Consumers.  

Representatives  from  the  Secretariat  General  (SG),  the  Legal  Service  (SJ),  DG  Justice  and 
Consumers  (JUST),  DG  Financial  Stability,  Financial  Services  and  Capital  Markets  Union 
(FISMA),  DG  Competition  (COMP),  DG  Communications  Networks,  Content  and 
Technology (CNECT), DG Economic and Financial Affairs (ECFIN), DG Employment, Social 
Affairs & Inclusion (EMPL) and DG Internal Market, Industry, Entrepreneurship and SMEs 
(GROW) were appointed to the Interservice Steering Group. 

The Interservice Steering Group met two times between May 2021 and November 2021. The 
first meeting was held on 27 May 2021 and the second meeting on 3 November 2021. 

3)  Consultation of the RSB 

An upstream meeting was held with the Regulatory Scrutiny Board (RSB) on 4 June 2021, to 
informally  discuss  questions  concerning  how  to  prepare  the  best  possible  report  for  the 
Directive’s  revision.  The  draft  of  the  impact  assessment  was  submitted  to  the  RSB  on  10 
November 2021 and discussed at the RSB hearing of 8 December 2021. The RSB delivered a 
POSITIVE opinion on 10 December 2021.  

The comments formulated by the Board were addressed and integrated in the final version of 
the impact assessment. The two tables below present the elements of the RSB opinion and how 
the report has been updated to take them into account. 

Main issues raised by the RSB in its opinion and related updates 

(1) The report does not present the options nor their structure and content in sufficient detail. It 
does not explain why options without the safety net are not discarded.  

Related updates: 

  The  Revised  IA  Report  clarifies  the  overall  options  and  structure/content  in  more  detail  by 
explaining in the introductory party of Chapter 5 (‘What are the available options) the narrative 
and  steps  taken  in  order  to  device  the  options  and  structure.  The  opinion  of  the  different 
stakeholders has been added in order to illustrate their respective support to certain policy options. 
In this introductory explanation, and through the support the different options obtained from the 
different stakeholders, an explanation is given why the options that do not include the safety net 
were not discarded. In this light, the part on options discarded at an early stage is also strengthened. 

 

96 COM(2020) 440 final, Annexes. 

60 

 
                                                           
  Under Chapter 5.2 (Description of the Policy Options) the content of the respective policy options 
has been described in greater detailed, in particular Policy Option 1. In this light, the corresponding 
Table 5 (Proposed measures per Policy Option covering financial services) has also been improved. 

(2) The report does not sufficiently assess impacts on business. It does not explain estimates and is 
not clear about limitations   

Related updates: 

  The Revised IA Report has strengthened the impact analysis. It provides further analysis and 

explanation related to the cost to businesses and consumer detriment in Chapter 6 (‘What are the 
impacts of the policy options’). 

  The  Revised  IA  Report  has  improved  the  monetisation  of  consumer  empowerment  through  the 
calculation of consumer detriment by summarising the detail in annex 4 in the main body of the 
Revised IA Report and the ‘cost-of non-Europe’ has been integrated into the analysis. 

  The Revised IA Report has further elaborated on the burden reductions or costs that the proposed 

measures will entail under the respective policy options, including for businesses. 

  The estimates have been clarified and the limitations of the figures explained. 

Specific improvements requested by the RSB 

(1) The problem analysis should assess potential 
risks (e.g. data protection,  
discrimination) associated with the access by Big tech 
companies to personal data when  
providing financial services at a distance as this may 
affect both fair competition in affected markets and 
consumer trust 

(2) The report should clarify the content and 
structure of the policy options. It should  
explain why options differ not only in the envisaged 
legal delivery instrument, but also  
contain different approaches to modernise and update 
the provisions of the current  
DFMSD. It should explain how these are linked to the 
different legal delivery instruments.  
The most ambitious modernisation option should be 
more specific on the precise measures  
it would include. 
(3) The report should better explain why it does not 
discard options without the safety net  
upfront.  The  problem  description  demonstrates  that 
the safety net ensures an important  
element of trust. Without it the options risk to be 
ineffective on the consumer protection  
objectives.  

(4) The report should explore whether including 
DFMSD provisions in the Consumer  
Rights Directive may result in unintended 
consequences such as increased complexity of  
the Consumer Rights Directive  

(5) The report should strengthen the impact analysis. 
In particular, it should provide  
further explanation related to the cost to businesses, 
potential consumer detriment and the  
impact on SMEs 

How the RSB comments have been addressed in 
the revised IA report 
This  issue  has  been  further  developed  under  the 
problem  description  chapter  and  the  subsidiarity 
chapter. 

Cf main issue 1 
Content and structure of each policy option has been 
explained in further detail; 
Better explanation of the options in the  introductory 
narrative, spelling out how and why the options differ 
in content and in envisaged delivery instrument. 
The precise measures of the most ambitious option 
(Option 2) have been further explained. 

Cf main issue 1 
The Revised IA Report explains the methodology 
that was applied when conducting the Report and in 
so doing, explains why the options that do not 
contain the safety net could not be discarded upfront. 

This point has been addressed in two parts of the 
Revised IA Report: (i) under the description of the 
policy option that suggests the inclusion of current 
DMFSD provisions in the Consumer Rights 
Directive, and (ii) when describing the preferred 
option. 
A short section dedicated to SME has been included 
in Annex 3. 

61 

 
 
 
 
 
 
(6) The report should provide more detail on the  
assumptions underpinning estimates (e.g.  
artificial 10% reduction of the consumer benefit in 
absence of the safety net), the data  
sources and the calculation methods for all key 
estimates, in particular the calculation of  
costs and benefits. It should present clearly the 
limitations and how they are addressed 

Cf main issue 2 
The report has added the requested detail, in 
particular concerning the assumptions, such as the 
10% reduction, the data sources and the calculation 
methods. 

(7) The report should be more specific on the 
timeframe for the evaluation of the newly  
included provisions in the Consumer Rights 
Directive.  

The Revised IA Report indicates that the timeframe 
for the evaluation of the newly included rights will 
be in synch with another Commission Proposal that 
also intends to amend the Consumer Rights Directive 

Some more technical comments have been sent 
directly to the author DG. 

Other technical comments have be taken into 
account, including the revision of the Table: 
Overview of Benefits – Preferred Option. 

4)  Evidence, sources and quality 

For the purpose of this impact assessment, Commission services collected data through various 
sources and consultation strands (see also Annex 2). 

The impact assessment relies and builds on the Evaluation of the Directive, which took place 
in 2018-2019 and was announced in the 2019 Commission Work Programme. To this end, the 
Commission published an Evaluation Staff Working Document and an Executive Summary of 
the Evaluation.97 The Evaluation of the Directive received a positive opinion from the RSB.   

The  Commission  published  the  Inception  Impact  Assessment  of  the  Directive  and  received 
public feedback on it from 28 May 2021 to 25 June 2021. 

The Commission also based the impact assessment on the evidence gathered from the Open 
Public Consultation on the “Distance marketing of consumer financial services – review of EU 
rules”, which was held from 22 June 2021 to 28 September 2021. 

The  Commission  also  consulted  its  dedicated  Member  State  Expert  Group  on  the 
Implementation of the Consumer Credit Directive, specifically to discuss the Review of the 
Distance Marketing of Financial Services Directive (June 2021). 

The Commission had previously outsourced to an external contractor a study supporting the 
Evaluation of the Directive, whose final report was also published (2020).98  

97 See https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/2002-Distance-Marketing-of-Financial-
Services-evaluation-of-EU-rules_en.  
98  See  https://ec.europa.eu/info/business-economy-euro/banking-and-finance/consumer-finance-and-payments/retail-
financial-services/distance-marketing-financial-services_en.  

62 

 
 
 
 
 
 
 
 
 
 
 
                                                           
In 2021, the Commission outsourced a new supporting study to provide sound evidence and 
analysis for preparing this impact assessment for potential EU action to revise the Directive. A 
contract for expert advice for impact assessment analyses to be conducted in the context of the 
legislative initiative under the  New Consumer Agenda  was  outsourced  and a professor  was 
appointed. 

63 

 
 
 
 
ANNEX 2: STAKEHOLDER CONSULTATION – SYNOPSIS REPORT 

1)  Introduction and consultation strategy 

a.  Objective of the consultation  

The  stakeholder  consultation  collected  information  and  feedback  on  various  aspects  of  the 
possible  revision  of  the  DMFSD  from  a  wide  range  of  key  stakeholders  representing 
consumers, retail financial services providers, national authorities, and other relevant interest 
groups. It included semi-structured interviews, a follow-up online survey, the analysis of the 
feedback  to  the  Commission’s  Inception  Impact  Assessment  (IIA)99  the  analysis  of  the 
responses  to  the  Commission-run  public  consultation  on  Distance  marketing  of  consumer 
financial services100, a validation workshop covering the key findings of the study, as well as 
ad hoc contributions from stakeholders provided through other channels and consultation tools. 

The aim of the consultation was to obtain qualitative and quantitative information from key 
stakeholders at national and EU level representing all groups concerned by the possible revision 
of the DMFSD. 

2)  Consultation activities and tools - types of stakeholders and data collection tools 

The impact assessment relies extensively on the evidence findings of the external supporting 
study prepared by the contractor VVA/LE Europe (Study on the possible impacts of a proposal 
for revision of Directive 2002/65/EC concerning the distance marketing of consumer financial 
services) which fed into the analysis of the Commission. The study was carried out under close 
guidance of DG JUST.  

The impact assessment also relies on the information and evidence gathered in the context of 
the 2019 Behavioural study on the digitalisation of the marketing and distance selling of retail 
financial services101 and the REFIT evaluation published in 2020102. 

The consultation strategy was underpinned by a number of key activities using multiple tools 
to target a wide range of stakeholders through different channels and gather insights from as 
many relevant stakeholders as possible.  

Stakeholder feedback was received on the Inception Impact Assessment between 28 May and 
25 June 2021, following the Commission Proposal to review the DMFSD as part of the REFIT 
Annex of the Commission Work Programme 2020. A total of 14 contributions were received, 
analysed and taken into account. Overall, 9 contributions came from financial service providers 
and associations, 3 contributions came from consumer organisations, and 2 contributions came 
from others (1 trade union, 1 citizen). 

99 

See 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13048-Distance-marketing-of-

See 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13048-Distance-marketing-of-

consumer-financial-services-review-of-EU-rules/feedback_en?p_id=24834005.  
100 
consumer-financial-services-review-of-EU-rules/public-consultation_en. 
101 See  
https://ec.europa.eu/info/sites/default/files/live_work_travel_in_the_eu/consumers/digitalisation_of_financial_services
_-_main_report.pdf.  
102 
See 
Financial-Services-evaluation-of-EU-rules_en. 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/2002-Distance-Marketing-of-

64 

 
                                                           
The  Commission  also  consulted  its  dedicated  Member  State  Expert  Group  on  the 
Implementation  of  the  Consumer  Credit  Directive  specifically  to  discuss  the  Review  of  the 
Distance Marketing of Financial Services Directive (June 2021). 

The  stakeholder  interviews,  organised  by  the  contractor,  aimed  at  gathering  views  from 
various  key  stakeholder  groups.  The  interviews  were  performed  from  29  July  2021  to  20 
September 2021. Overall, 26 interviews with national authorities were performed, ranging from 
national regulatory authorities, consumer protection authorities and ombudsman. Furthermore, 
four contributions were collected from EU and national consumer associations. To gather the 
perception of the financial industry, three interviews with financial industry associations and 
two interviews with financial service providers were also conducted. The aim of the interviews 
was gathering information and views on the relevance of the DMFSD, potential gaps  in the 
provisions,  areas  of  improvements  and  qualitative  data  on  the  potential  effects  of  a  repeal 
(including  costs  and  benefits).  The  findings,  together  with  the  results  of  other  research 
activities, were used to develop preliminary policy options. 

An  Open  Public  Consultation  was  launched  by  the  European  Commission’s  DG  JUST 
between 22 June 2021 and 28 September 2021 and 45 stakeholders’ answers were received. 
The  feedback  received  was  analysed  in  order  to  gather  additional  evidence  for  the  study 
regarding the relevance of the DMFSD, its application and enforcement. Overall, 6 consumer 
associations, 3 public authorities and 28 business associations and business contributed to the 
consultation. The rest of the participants comprised of academic/research institutions, NGOs 
and EU citizens. 

A follow-up online survey, organised by the contractor, ran between 13 September 2021 and 
3 October 2021. It targeted national authorities, consumer associations and financial service 
providers in all Member States. The survey focused on obtaining input on the expected impact 
of preliminary policy options and measures (including costs and benefits). 

Lastly, a validation workshop was organised by the contractor on 20 October 2021. It offered 
participants  a  chance  to  discuss  the  various  policy  options,  covering  aspects  such  as  their 
expected effectiveness  and efficiency in  addressing the problems  identified and the impacts 
that they are likely to have on key stakeholders. 46 stakeholders participated.  

Table 11. Summary table on the numbers and type of activities 

Stakeholder 
group 

Businesses and 
business 
associations 

National 
Regulatory 
Authorities 

Consultation methods 

Interviews 

Survey 

IIA 

OPC 

Workshop 

9 

- 

28 

3 

12 

31 

5 

26 

6 

9 

65 

 
 
 
 
 
 
Stakeholder 
group 

Consumer 
Associations 

Academic 
institutions 

Other103 

4 

- 

- 

3 

- 

- 

Total 

35 

18 

Consultation methods 

3 

- 

2 

14 

6 

1 

7 

3 

- 

- 

45 

46 

Other  inputs  were  received  through  bilateral  meetings  with  stakeholders,  specific  ad-hoc 
reports and data from consumer associations, industry representatives and researchers. 

The evidence collection for the Staff Working Document is also based on the Commission’s 
experience in monitoring and implementing the Directive. 

3)  Evidence, Sources and quality  

Thorough desk research and legal analysis were conducted. 

The implementation of the stakeholder consultation encountered various challenges, some of 
which affected most consultation activities. The timing of the consultation also constituted an 
obstacle as it coincided with the summer period, when many stakeholders take their annual 
leave.  Stakeholder  fatigue  may  have  also  contributed  to  the  low  response  rate.  Most 
stakeholders had already started preparing their contribution for the Open Public Consultation 
argued they had no additional time nor views to share in such a short period of time. 

Below  is  a  summary  of  the  key  limitations  affecting  the  quality  of  the  evidence  collected 
through some of the stakeholder consultation activities. 

Stakeholder  interviews:  the  number  of  interviews  conducted  with  national  authorities  and 
ministries did not reach the target of 50 interviews initially planned. Several efforts were made 
to  increase  participation,  including  sending  additional  reminders,  extending  the  deadline 
several times, using the European Commission’s own communication channels, and giving an 
option to provide written feedback, with limited success.  

Follow-up survey: the low response rate is the main limitation affecting the surveys despite the 
efforts  to  boost  the  response  rate  (such  as  extension  of  the  deadline  to  submit  responses, 
additional  reminders  via  email  and  phone  and  contact  with  alternative  stakeholders). 
Considering relatively small window of opportunity for stakeholders to provide feedback (three 
weeks), and the fact  the survey  was launched shortly  after stakeholder interviews had been 

103 NGOs, European citizens and unspecified. 

66 

 
 
 
 
 
 
 
 
                                                           
concluded, some stakeholders reported not having sufficient availability to participate in the 
survey. Some also argued that their stance was adequately captured during the interview stage.  

Open Public Consultation: a high number of responses was received especially from business 
associations  and  financial  service  providers,  which  helped  balance  the  views  gathered  via 
surveys  and  interviews.  In  addition,  the  public  consultation  also  collected  the  views  from 
additional stakeholder groups such as citizens, NGOs and academic and research institutions. 

4)  Main stakeholder feedback per consultation activity  

a.  Inception Impact Assessment  

The input consisting of 14 contributions covered the assessment of the expected impacts of a 
potential EU action to revise the Distance Marketing of Financial Services Directive, including 
economic, social and impacts on simplification and administrative burden.  

 The  outcome  of  this  feedback  illustrated  that  financial  service  providers  prefer  either  the 
baseline scenario or the option to repeal the Directive. Those providers that opted to keep the 
baseline argued that deleting the Directive would deprive financial services from the benefits 
of the safety net feature.   

Consumer organisations mostly favour a comprehensive revision of the DMFSD and mention 
the added value of the Directive represented by the safety net. They also point to ways of how 
to  modernize  the  current  text  and  build  on  it,  for  example  taking  into  account  the  various 
digitalisation aspects that have come up since the adoption of the Directive. 

b.  Member State Expert Group meeting 

In its dedicated Member State Expert Group on the Implementation of the Consumer Credit 
Directive specifically to discuss the Review of the Distance Marketing of Financial Services 
Directive (June 2021), the Commission presented in detail the state of play of the file, including 
the  problems  and  options  presented  in  the  Inception  Impact Assessment,  before  the  tour  de 
table on a set of questions took place.  

The  questions  concerned:  the  added  value  and  relevance  for  the  DMFSD  in  light  of 
product/horizontal legislation that occurred since its adoption, reference to concrete examples 
for the actual application of the DMFSD as a ‘safety net’, and the application/enforcement of 
the DMFSD.  

The Member States gave several preliminary comments, from which a wide and rather variated 
picture  emerged.  A  small  number  of  Member  States  consider  that  the  DMFSD  only  has 
theoretical value at the moment, and no longer has relevance. These Member States consider 
that  its  main  features  are  included  in  sectoral  legislation  and  there  are  overlaps,  while  they 
consider sectoral legislation more robust. Some of these Member States held that even if the 
DMFSD were to be deleted, they would not amend, in the short-time, their national legislative 
framework. One Member State could agree to repeal the DMFSD, but called to ensure that the 
still valid parts are covered by product-specific legislation. This Member State cautioned that 
if repeal were to happen, the absorption of the protective framework of the DMFSD by other 
pieces of legislation is important so that there are no loopholes. A large number of Member 

67 

 
States that took the floor were against a repeal because they thought it would leave a gap, and 
consider the DMFSD still relevant especially for the general framework and transparency it 
provides. The Member States against the repeal of the DMFSD argued that its provisions are 
used  in  investigation  and  enforcement  actions  and  that  repealing  the  safety  net  feature  will 
lower the level of consumer protection. 

c.  Interviews 

On  pre-contractual  information:  Despite  some  variation  between  financial  sectors,  most 
stakeholders  indicated  that  the  provisions  on  pre-contractual  information  are  useful  for 
providing consumers with a high level of protection. Further analysis shows that opinions differ 
between public authorities, consumer associations and the industry.  

On average, consumer associations rated Article 3 of the DMFSD as useful, while financial 
industry  associations  and  financial  service  providers  consider  the  provisions  mostly  not 
useful considering the average score. Overall, 20 national authorities and ministries provided 
input on how useful provisions on pre-contractual  information  are for consumer protection. 
Based on their input it appears that national authorities have different views on the relevance 
of this provision.  Overlapping with  national  legislation  and product-specific legislation was 
identified as the main driver behind the reduced relevance of Article 3. In contrast, some public 
authorities and ministries find the provisions on pre-contractual information of the DMFSD 
still  useful  to  a  certain  degree.  They  mentioned  three  main  reasons:  the  DMFSD  acts  as  a 
“safety  net”,  the  DMFSD  is  more  stringent  compared  to  other  legislation,  and  the  DMFSD 
bridges the gaps in consumer protection left by other directives. 

In  most  cases  participants  believe  repealing  Article  3  of  the  DMFSD  would  produce 
moderate to high costs. For insurance products, payment accounts and personal pensions the 
potential costs according to half of participants would be high or very high. On the other hand, 
regarding consumer credits and mortgages, over 20% of participants suggested a repeal would 
not incur any costs for concerned parties. 

Six national authorities out of 20 who replied, believe repealing the DMFSD would not create 
any  costs  for  concerned  stakeholders.  Other  public  authorities  believe  that  by  repealing  the 
DMFSD,  financial  service  providers  would  be  obliged  to  provide  less  pre-contractual 
information which would in turn result in lower benefits for service providers and high costs 
for  consumers.  Seven  authorities  believe  costs  of  the  repeal  would  be  high  for  consumers 
purchasing  services  which  are  not  covered  by  product-specific  legislation.  Six  respondents 
indicated that Article 3 of the DMFSD is more stringent than other legislation which is why 
repealing it would create high costs for consumers. 

All four consumer associations believe that repealing Article 3 of the DMFSD would create 
high  costs  for  consumers  in  sectors  not  covered  by  other  legislation.  In  this  regard,  they 
specifically referred to new emerging markets.  

On the contrary, business associations and financial service providers indicated that repealing 
the DMFSD would result in low costs since product-specific legislation already addresses all 
the relevant issues. 

68 

 
On the right of withdrawal: Concerning the issue of sub-optimal use of right of withdrawal, 
interviewees had different opinions on the usefulness of article 6 to ensure an effective level of 
consumer  protection.  Indeed,  the  stakeholders’  opinion  varied  depending  on  the  type  of 
product. For consumer credits and mortgages, around 40% of the interviewees mentioned that 
article 6 is mostly not useful, while around 25% of the stakeholders interviewed declared it is 
sometimes useful with only 15% mentioning that it is extremely useful. However, for other 
products,  such  as  insurance  products,  other  emerging  services,  personal  pension  products, 
article 6 seems to be still very useful. As an example, for insurance products, around 80% of 
the interviewees have rated this provision as useful, of which 35% have rated it as extremely 
useful and 55% as mostly useful. 

National  authorities’  opinion  on  the  usefulness  of  the  DMFSD  right  of  withdrawal  also 
depended on the type of product. 6 national regulatory authorities stated that the DMFSD right 
to withdrawal is still extremely useful since, since 2002 the distance marketing of consumer 
financial services has changed in light of the digitalisation and the commercial practices used 
online by providers.  

These 6 national regulatory authorities agree that the Directive, due to its horizontal application 
acts as a safety net for financial services and thus is useful for current products for which the 
legislation  does  not  provide  a  right  of  withdrawal  (e.g.  insurance)  and  for  future  ones. 
Provisions on the right to withdrawal are regarded as necessary and should not be repealed, 
unless  other  legislation  (i.e.  directives)  ensure  an  effective  right  of  withdrawal  in  all  cases 
currently falling within the scope of the DMFSD. As an example, in several countries payment 
related  services,  insurances,  pensions  and  investments  products  are  not  covered  by  sector 
specific legislation. 

Concerning consumer associations, there is a consensus on the extremely usefulness of the 
DMFSD  in  terms  of  right  of  withdrawal,  especially  for  pensions,  insurance  products, 
investment products. 2 out of the 4 interviewed highlighted that consumers should be clearly 
informed about the procedure and provided the relevant withdrawal form before signing the 
contract. Granting a right of withdrawal and providing information to consumers on how to 
exercise it is very important for all financial services purchased online. 

Concerning financial service providers, out of the 5 interviewed, 2 highlighted the extremely 
relevance of Article 6 of the DMFSD for home savings and cross-border sales. According to 
two of them, the most relevant aspect of such provision is the 14-days right to withdraw period. 

When  asked  about  the  costs  on  consumer  protection  in  case  Article  6  were  repealed, 
interviewees  opinions  differed  greatly,  again,  depending  on  the  product  concerned. As  an 
example, for consumer credits, the majority of stakeholders highlighted the low/no costs for 
consumers: around 70% mentioned that in case Article 6 of the DMFSD were repealed, there 
will likely be no or very limited in terms of costs for consumer credits (including credit cards).  

On  the  other  hand,  for  insurance  products,  personal  pension  and  other  emerging  services, 
around 50% of the stakeholders agreed that a possible elimination of Article 6 would create 
high/very  high  costs  on  consumer  protections.  Moderate  costs  were  foreseen  for  payment 
accounts and mortgages. 

69 

 
On cross-border transactions: According to stakeholders, the main problems consumers face 
when  purchasing  financial  services  from  different  Member  States  mostly  concern  pre-
contractual information, exercising the rights to withdrawal and starting a redress process. 

d.  Open Public Consultation  

On the DMFSD as a safety net: 

Digitalisation has led to new financial products emerging into the market at an increased pace 
and are increasingly offered online. Recent examples of new products not covered by product 
specific legislation include peer-to-peer lending, increased online offers of payday loans, and 
buy-now-pay-later schemes. In all these cases, the rights contained in the DMFSD are fully 
relevant  (pre-contractual  information  and  right  of  withdrawal),  and  the  DMFSD  should  in 
principle  act  as  a  “safety  net”  for  these  new  products,  ensuring  a  uniform,  high  level  of 
protection  for  consumers  across  the  EU. As  financial  products  are  increasingly  being  sold 
online, and the number of physical bank branches is steadily decreasing, consumers should be 
duly protected whenever new products and technologies are launched into the market, which 
are not yet covered by product-specific legislation. 

Business  associations  believe  that  the  DMFSD  provides  a  common  ground  for  consumer 
protection when the sale of a service is not specifically regulated, usually for the pre contractual 
and contractual information, and for the right of withdrawal. This framework leaves room for 
innovation  and is  still valid. Business organisations also  highlight  the increasing familiarity 
with  the  use  of  the  Internet  as  a  result  of  the  containment  and  lockdown  measures  adopted 
during the Covid-19 pandemic. They expect that specific provisions could eventually raise that 
level  of  protection  in  certain  sectors,  but  it  should  be  considered  that  the  safety  net  of  the 
Directive creates a level playing field for financial services, in a broad sense. 

Consumer organisations support that the DMFSD ""safety net"" is useful for all types of retail 
financial services products sold online that are not yet covered by product-specific legislation 
as they are new and have been created afterwards. 

NGOs  mention  that  while  product-specific  legislation  is  increasingly  bringing  currently 
unregulated products into scope, this is often not immediately after a new financial services 
product is brought to market given the need for a proper legislative process to bring them into 
scope  first.  Moreover,  there  are  ample  examples  of  product-specific  legislation  that  do  not 
cover or do not cover sufficiently key consumer protection rules of the DMFSD. For example, 
without  the  DMFSD,  key  consumer  protection  requirements  would  be  lacking  for  savings 
accounts  sold  online.  Other  examples  can  be  found  in  the  insurance  sector.  Consumers  of 
insurance bought online would not be able to benefit from the right of withdrawal without the 
DMFSD.  

Public  authorities  have  provided  instances  when  they  applied  the  DMFSD  during 
investigations and enforcement actions (e.g. the need to provide pre-contractual information 
when diamonds are sold online). 

On pre-contractual information: 

70 

 
Business  associations  believe  that  the  provisions  of  the  DMFSD  on  pre-contractual 
information are still relevant for savings accounts, consumer loans not covered by the consumer 
credit directive in its current form or for new products and mortgage credit. Also, the DMFSD 
provisions for telephone sales remain fully relevant  given the absence of specific European 
legal provisions applicable to payment services, payment accounts, investment products and 
consumer  credit.  For  those  services  covered  by  product-specific  legislation,  the  DMFSD 
provides complementary protection. However, the large amount of pre-contractual information 
can contradict its actual purpose, namely, to provide the customer with a clear and transparent 
product  description  and  thus  a  sound  basis  for  decision-making.  Deletion  of  the  obsolete 
information  requirements  of the DMFSD and  focus on essential details  would be welcome. 
Business organisations also consider that the rules laid down by the DMFSD result outdated 
and obsolete as a result of more recent product specific legislation. 

Consumer organisations argue that the right to pre-contractual information contained in the 
DMFSD will be even more important in the future as financial institutions and new players 
such as Fintechs and Bigtechs are increasingly offering products online, with physical bank 
branches closing at an increased pace in the face of the COVID-crisis and the overwhelming 
digitalisation of the financial services market.  In order to ensure that the provisions on pre-
contractual information are applied in practice, enforcement of the articles stemming from the 
Directive is crucial. 

NGOs mention that the articles of the DMFSD may be applied in case of problematic products 
sold by distance (over the Internet or by phone). For example, this takes place in case of cross-
selling when consumer credit products mortgages which are sold to consumer together with 
other products such as payment protection insurance. 

Public authorities noted that most of the product-specific legislation already provide rules on 
pre-contractual information. However, this provision is important in case of a future emerging 
product  for  which  no  legislation  is  as  yet  applicable  since  providing  pre-contractual 
information is a basic right. 

On the right of withdrawal: 

Business associations consider that the 14-day right to withdraw is one remaining aspect of 
the Directive which is still relevant and therefore must be retained. They are open also to amend 
the relevant sector-specific legislation to include the 14-day right. Overall, future legislation 
should be designed to be technology-neutral and future-proof.  

Consumer organisations pointed out that financial service providers often exploit behavioural 
biases of consumers online, an environment where they are particularly vulnerable. In these 
situations, the right of withdrawal is extremely important in order to ensure that consumers are 
duly protected from unsuitable or overly expensive products, as well as hidden charges. Most 
complaints concerned the lack of consumer information of this right, the refusal by the provider 
to  accept  the  withdrawal  and  bureaucratic  difficulties  faced  by  consumers  while  exercising 
their  right. According  to  them,  the  DMFSD  should  therefore  be  revised  to  ensure  that  the 
procedure to exercise the right of withdrawal is simple and straightforward for consumers and 
consumers are duly informed about this procedure. 

71 

 
Public authorities noted that the right of withdrawal is still relevant in a number of important 
financial services, such as insurance. 

On unsolicited services and communications: 

Business associations consider that the issue of unsolicited services is sufficiently addressed 
by the provisions of the Unfair Commercial Practices Directive. 

Consumer organisations also refer to the fact that the Unfair Commercial Practices Directive 
added a ban on inertia selling into Article 9 of the DMFSD. Regardless of how often the article 
on unsolicited services is applied or enforced, this article is not in itself sufficient to adequately 
protect consumers in the digital era. Consumer consent in the digital space can be obtained by 
default, for example via the use of pre-ticked boxes. The Consumer Rights Directive already 
prohibits the pre-ticking of boxes, but does not, for the moment, apply to financial services. 

Regarding  unsolicited  communications,  public  authorities  consider  that  the  issue  is 
sufficiently  addressed  in  existing  regulations  and  retaining  the  relevant  provisions  in  the 
DMFSD  would  offer  little  value  to  consumers.  The  provisions  of  the  GDPR  relating  to 
lawfulness of processing and consent are more comprehensive and stringent and therefore more 
effective in protecting persons from unsolicited communications than the DMFSD. 

On  the  relevance  of  the  DMFSD  and  the  application  of  horizontal  and  product-specific 
legislation: 

Business associations mention that since its creation, the Directive has put in place a safety 
net whose spirit and content allow adaptation to technological developments and thus ensure a 
high level of consumer protection. Today, the Directive creates legal uncertainty due to overlaps 
and/or duplications with provisions of more recent sector or products specific EU legislation 
such  as  the  Insurance  Distribution  Directive  (IDD)  and  the  Packaged  Retail  and  Insurance-
based  Investment  Products  Regulation  (PRIIPs  regulation)  that  have  introduced  new  pre-
contractual information or disclosure requirements that aim to strengthen the protection of the 
consumer. These EU texts (and also the GDPR and the e-privacy Directive) therefore diminish 
the intention and effect of the Directive. Overlapping legislation creates unnecessary regulatory 
burden which increases costs to the financial institutions and ultimately to the consumer. 

Consumer organisations believe that new products are increasingly appearing on the online 
financial products market that are not yet subject to specific regulation. Thus it still is relevant 
and will continue to be relevant, irrespective of any other legislation.  

Public authorities acknowledged that the relevance of the DMFSD has  decreased over the 
years and that time is ripe to revise its legal clarity. 

On the repeal of the DMFSD: 

Business associations consider that there is currently too much duplication in the information 
that has to be provided to the consumer at pre-contract stage. Repealing parts of the Directive 
will remove duplication and additional work involved, as well as reduce costs. Product-specific 
directives are more effective in providing consumer protection because such requirements are 
suited  to  the  product  in  question.  They  consider  that  the  only  provision  that  has  not  been 
superseded  and  retains  value  is  the  14-day  right  of  withdrawal.  Companies  additionally 

72 

 
highlight that possible abolition of the DMFSD would risk to create fragmentation between 
actors due to different sectoral regulations and a risk of distortion of competition. 

Consumer organisations highlight that the repeal of the directive would lead to a decrease in 
the  level  of  consumer  protection  for  financial  services  that  are  not  or  not  fully  covered  by 
product-specific directives, as well as for all new types of financial products. The digitization 
of the distribution of financial services has increased significantly since the directive came into 
force and at the same time providers are reducing their physical representation and accessibility 
for  consumers. This  development  shows  how  important  it  is  to  reduce  existing  information 
asymmetries  between  providers  and  consumers  in  order  to  protect  consumers  from  hasty 
decisions (through pre-contractual information) and to enable them to revoke these decisions 
if necessary (through the right of withdrawal).  

Public  authorities  consider  that  consumer  protection  would  be  badly  affected,  if  DMFSD 
would  be  repealed.  There  is  no  product-specific  legislation  covering  all  kind  of  financial 
products and product-specific regulation will never be up to date as such products may appear 
in every moment. So they appreciate DMFSD as a safety net. Public authorities also noted that 
the DMFSD is still used for investigation and enforcement actions. 

e.  Survey results 

On the baseline scenario: Concerning the current level of consumer protection regarding pre-
contractual information, business associations and public authorities stakeholders consider that 
the level of protection offered by the DMFSD is very low or low since there is a large amount 
of overlap. Thus, the applicable law is not the DMFSD but the product-specific legislation. On 
the other hand, these same stakeholders and consumer organisations think that the current level 
of the protection regarding the right of withdrawal is high or very high. 

On repeal: Concerning the effect on consumer protection regarding pre-contractual information 
if  the  DMFSD  was  to  be  repealed,  all  consumer  organisations  and  a  majority  of  public 
authorities and more than half of business associations anticipate that the effects would be very 
negative or negative, especially for the articles of the DMFSD which are still relevant. With 
regard  to  the  effect  of  repealing  the  provisions  on  the  right  of  withdrawal  without  any 
subsequent  legislative  intervention  replied  all  stakeholders,  apart  from  a  small  number  of 
financial services held that it would be very negative or negative. The same views by the same 
stakeholder replied that repealing the DMFSD would have very negative or negative effects to 
the safety net feature. 

introducing  new 
On  comprehensive  revision:  Consumer  organisations  believe 
comprehensive  rules  in  the  DMFSD  while  modernizing  the  current  rights  that  would  have 
positive  or  very  positive  effect.  With  regard  to  the  right  to  pre-contractual  information, 
according to the consumer organisations, new rules addressing how the information is to be 
presented  would have  a  positive to  very  positive effect.  Business associations and financial 
providers oppose a  comprehensive revision since they believe it will bring disproportionate 
burdens and rated this option as very negative or negative. Public authorities had a nuanced 
view and held that what was important is that the DMFSD is not repealed. 

that 

73 

 
Repealing  the  DMFSD  and  merging  with  horizontal  legislation:  Concerning  the  effect  on 
consumer protection regarding pre-contractual information and the right of withdrawal if the 
DMFSD was to be merged with the horizontal legislation, the majority of public authorities 
anticipate  that  the  effects  would  be  very  positive  or  positive. Around  half  of  the  consumer 
organisations also believe that this policy option is very positive or positive as long as the safety 
net is safeguarded. Business associations and financial providers had a nuanced position. 

On merging with vertical legislation: Concerning the effect on consumer protection regarding 
pre-contractual information and the right of withdrawal if the DMFSD was to be merged with 
the  vertical  legislation,  half  of  the  stakeholders  from  each  sector  anticipate  that  the  effects 
would be negative since the safety net would be lost. The other half anticipate that there would 
be no effect or the effect would be positive since the current overlap will be repealed. The rate 
of the effect, however, has been varying between the financial services as stakeholders believe 
that merging of the DMFSD with the vertical legislation s would be more positive for those 
financial services for which the DMFSD is still relevant. 

Comparing the options: There does not seem to be a particular policy option that the different 
stakeholders seem to like most. While consumer organisations tend to prefer the comprehensive 
option,  they  could  live  with  the  option  of  repealing  the  DMFSD  but  inserting  modernized 
provisions  in  the  Consumer  Rights  Directive.  On  the  other  hand,  business  associations  and 
financial providers do not support a comprehensive reform of the right of withdrawal which 
would include new provisions not yet found in the DMFSD. The majority of public authorities 
would support the modernization of the right to withdrawal. 

f.  Validation Workshop 

The validation workshop started with an introduction of the study objectives, methodology and 
the  presentation  of  the  Policy  Options.  After  the  presentation  of  the  study  and  the  Policy 
Options, stakeholders were asked to participate in assessing the impacts of the Policy Options. 
The contractor launched the online survey and asked the participants to evaluate each presented 
Policy Option in terms of its impact on costs (compliance and enforcement costs), consumer 
trust and welfare, and cross-border trade. 

Key  aspects  that  were  discussed  in  the  Q&A  session  were  related  to  the  usefulness  of  the 
DMFSD, the problems of the DMFSD and the preference of the Policy Options. 

Concerning the usefulness of the DMFSD, EU-level consumer organisations have expressed 
that DMFSD is an important legislation as it works as a safety for the consumers regarding the 
products that are not covered by product-specific legislation. 

As  for  the  problems  that  are  associated  with  the  DMFSD,  stakeholders  seem  to  be  in  an 
agreement  that  the  current  DMFSD  is  not  fully  in  line  with  the  recent  technological 
developments. Stakeholders, in general, agreed with the problems proposed by the study team. 
However, a consumer organisation mentioned that some additional problems (i.e. issues with 
personal  data,  regulation  of  the  comparison  websites,  issues  related  robo-advice)  could 
potentially  be  included  in  the  Policy  Options  2  (Comprehensive  report).  A  public  authority 

74 

 
 
described the problem of overlapping between the DMFSD and other horizontal and product-
specific legislation and explained that the DMFSD lacks legal clarity which then has triggered  
difficulties  to  companies,  consumers  and  national  regulatory  authorities.  Another  public 
authority noted that  it  is  often difficult  to  decide which legislation is  applicable. Therefore, 
according  to  EU-level  consumer  organisations,  introducing  standardised  forms  of  pre-
contractual  information  and  right  of  withdrawal  would  bring  more  certainty  and  it  would 
improve the DMFSD. In terms of cross-border trade, a consumer organisation has mentioned 
that improvement of the DMFSD would increase the trust from the consumers when purchasing 
financial  services  online,  hence,  this  would  also  result  in  higher  facilitation  of  cross-border 
trade in online financial services in the EU. 

Regarding the preference of the Policy Options, stakeholders had different opinions on which 
Policy  Option  would  be  the  most  appropriate.  Stakeholders  representing  consumer 
associations  noted  that  they  would  prefer  Policy  Option  2  (Comprehensive  Reform)  as  the 
improvement of the DMFSD is necessary to ensure higher consumer protection. Stakeholders 
from  some  national  regulatory  authorities  explained  that  they  would  prefer  Option  3a  as 
merging the DMFSD with horizontal legislation (the Consumer Rights Directive) would bring 
more legal clarity and coherence. Half of the stakeholders belonging to the financial services 
industry  said  that  their  associations  would  prefer  Option  0  (Baseline),  as  current  DMFSD 
operates efficiently as a safety net feature and any additional changes would bring extra costs 
to the businesses. 

75 

 
 
ANNEX 3: WHO IS AFFECTED AND HOW? 

1)  Practical implications of the initiative 

Overall, consumers would  be  affected  positively.  Consumer  trust  would  increase  thanks  to 
measures on how and when information should be presented, and on the reminder of the right 
to  withdrawal.  Additionally,  the  new  Directive  would  ensure  consumer  empowerment  by 
limiting practices exploiting behaviour patterns such as the use of default options. For the same 
reasons, the new provisions would have a positive effect on reducing consumer detriment (at 
least EUR 200-230 million) and on consumer trust. Moreover, a simplified and more coherent 
legal  framework and more choice due to  increased cross-border offer would  also  positively 
affect consumer trust and the reduction of consumer detriment.   

Business will be impacted in terms of costs and adaptation of their infrastructure and personnel 
costs (at least round EUR 18 million). On the one hand, they would have to face most of the 
implementation costs of the new Directive. The new provisions would incur additional one-off 
and  (limited)  recurrent  costs  for  businesses  since  the  new  measures  would  demand  service 
providers to familiarise themselves with the improved Consumer Rights Directive, adapt their 
IT  systems,  train  staff,  update  their  websites  and  update  contracts.  Adopting  new  rules  for 
presenting  pre-contractual  information,  removing  pre-ticked  boxes  and  updating  contracts 
would be done in the implementation phase. On the other hand, introducing more robust rules 
on the right to withdrawal could create more opportunities for consumers to submit complaints 
making  slightly  higher  costs  for  processing  those  complaints.  However,  the  repeal  would 
reduce  costs  in  terms  of  communications  to  consumers  which  are  higher  because  certain 
providers seem to send information twice to comply both with the DMFSD and with sector 
specific legislation. Nevertheless, the proposal's simplified framework which ensures the safety 
net feature would result in a more level playing field for industry across borders. The revised 
rules within the Consumer Rights Directive would provide harmonised provisions across all 
financial services sectors when the product is bought at a distance: implementing simplified 
rules on pre-contractual information and right to withdrawal would mitigate the fragmentation 
caused by differences in national regulations. 

Public  authorities  would  also  face  some  costs  (at  least  around  EUR  6  million).  The 
introduction of new measures to modernise current DMFSD provisions together with new rules 
(such as the prohibition of default options and adaptation of presentational rules for different 
distribution  channels)  would  introduce  some  one-off  and  recurrent  costs  for  national 
authorities, which will have to transpose and implement them. Nonetheless, the burdens would 
be low since the new proposed changes are minimal.  

2)   Summary of costs and benefits 

The tables below present the preferred measure's costs and benefits identified and assessed in 
the Impact Assessment. 

Table 12. Overview of Benefits – Preferred Option 

76 

 
Description 

Amount  

Comments 

Reduced recurrent costs for 
communication with 
consumers 

Clarification of the 
application of DMFSD 

Improve timing provision 
key info 

EUR 97,7 million (M) 

Figures drawn from VVA supporting study estimates 

Direct benefits 

EUR 42-48 M 

Figures drawn from VVA supporting study estimates 

Beneficiaries: financial services providers 

EUR 39-45 M 

Figures drawn from VVA supporting study estimates 

Beneficiaries: consumers  

Adapt information provision 
to channel 

EUR 36-42 M 

Beneficiaries: consumers (reduction in consumers’ 
financial detriment and monetised time losses). 

Figures drawn from VVA supporting study estimates 

Beneficiaries: consumers (reduction in consumers’ 
financial detriment and monetised time losses). 

Prohibition default options 

EUR 42,1-48,1 M 

Figures drawn from VVA supporting study estimates 

Beneficiaries: consumers (reduction in consumers’ 
financial detriment and monetised time losses). 

Cross-border trade: increase 
options for consumers 

EUR 36-48 M 

Figures drawn from VVA supporting study estimates 

Beneficiaries: consumers (reduction in consumers’ 
financial detriment and monetised time losses). 

Indirect benefits 

Not available 

Table 13. Overview of costs – Preferred option 

Citizens/Consumers  

Businesses 

Administrations 

One-off  Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Transposition/Ad
aptation 

Public 
Authorities 
monitoring and 
enforcement  

Familiarisation 
with new 
legislation 

Cost of 
updating/adaptin
g IT systems 

Direct costs 

- 

Indirect costs  Not available 

Direct costs 

- 

Indirect costs  Not available 

- 

- 

Direct costs 

- 

45,2 M  

Indirect costs 

Not available 

Direct costs 

- 

26,1 M  

Indirect costs 

Not available 

- 

- 

- 

- 

0,8 M 

- 

- 

- 

- 

5,1 M 

- 

- 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Updating 
contractual 
documentation 

Direct costs 

- 

30,1 M  

Indirect costs  Not available 

Staff training 

Direct costs 

- 

2,0 M  

Indirect costs  Not available 

- 

- 

Complaint 
handling 

Direct costs 

- 

- 

13,7 M  

Indirect costs  Not available 

- 

- 

- 

- 

- 

- 

3)  Impact on Small & Medium Enterprises (SMEs) 

The population of SMEs in the financial services differs from the composition of the European 
economy in other sectors. In the analysis conducted by the Support Study, SMEs account for 
nearly 70% of the overall composition of the business population ranging from 67% of credit 
institutions, 79% of pension funds and 76% of insurance companies. Micro companies are a 
small proportion, with only 10% of credit institutions having a turnover lower than 2 million 
euros and less than 10 employees, 52% of pension funds and 62% of insurance companies104. 

According  to  the  analysis  conducted  by  the  Support  Study  and  the  feedback  received  by 
consulted  stakeholders,  SMEs  should  not  be  impacted  disproportionately  in  comparison  to 
larger  enterprises.  The  main  types  of  impacts  considered  for  this  assessment  would  apply 
proportionately also to these businesses. 

Regarding  the  compliance  costs,  in  particular  the  cost  of  familiarisation  with  the  new 
legislation and the consequential cost for the update of documentation and information systems, 
the overall costs for SMEs in the financial sectors, would account to 122 million euros for the 
initial one-off costs. 

Recurring costs, such as staff training, are proportional to the number of employees. In 2020, 
approximately 250 thousand of the nearly 2 million employed in the sector, worked in SMEs. 
Consequently,  the  expenses  for  SMEs  would  be,  proportionally,  less  burdensome  for  this 
category of businesses. According to our estimates, the overall cost would account for 4 Million 
euros in total for the period 2021-2031. 

104 For the purposes of this analysis, we have taken into account only enterprises with more than 1 employee and 
considered  the  NACE  Rev.  2  classes:  Credit  institutions  excluding  central  banking  (K6419),  Insurance 
(K651) and Pension funding (K653). 

78 

 
 
 
 
 
 
 
 
                                                           
4)  One-in, one-out 

The principle of the “one in, one out” approach consists of offsetting any burden for citizens 
and businesses resulting from the Commission’s proposal by removing an equivalent existing 
burden in the same policy area.  

In the assessment, Policy Option 3(a) would entail a repeal of the DMFSD and integration of 
the  measures  aimed  at  ensuring  consumer  protection  in  an  already  existing  directive  with 
horizontal (cross-industry) application such as the Consumer Rights Directive. This approach, 
aimed at creating a simplified and cross-industry framework for consumers’ protection, would 
bring a net benefit to consumers without any expected additional cost for citizens: their rights 
would remain protected with no detriment to their condition and ensuring the role of “safety 
net” in case of emergence of new financial products or services.  

In parallel, this simplification would also reduce costs for businesses in the financial services, 
one of the sectors with the highest level of regulation. The simplification would reduce the risk 
of inconsistencies with other legislative interventions – present or future – reducing the burden 
on  businesses  to  ensure  that  the  most  recent  and  relevant  norm  applies  and  that  mandatory 
communications with consumers is streamlined. A regulatory change would entail an initial 
one-off cost for business to adapt. These costs would mainly involve familiarisation activities 
(i.e. staff training on new regulatory framework) and update of commercial documentation to 
reflect  the  new  framework.  In  the  long  term,  however,  the  positive  effect  of  a  simplified 
regulatory framework should outweigh the initial burden 

Table 14. One-in, One-out table 

Net-in 

Amount 
(EURm) 

 Description 

Businesses 

Net-out 

Businesses  

Consumers  

103 

Amount 
(EURm) 

98 

42 

Update of non-labelling information (e.g. 
financial prospectus) and of IT systems, 
familiarisation with the information obligations 
and staff training 

 Description 

Simplification of the regulatory framework 

Clarification of regulatory framework 

According  to  the  estimates  of  costs  and  benefits  under  policy  option  3(a),  the  regulatory 
intervention would very likely generate adaptation costs for businesses, in particular regarding 
the update of documentation, information material, IT systems and staff training. In most cases, 
these will be one-off costs that businesses would incur in the initial stage to ensure compliance 

79 

 
 
 
with the revised regulatory framework. In the mid-term the costs should be off-set by costs 
reduction for both businesses and consumers. In particular, the simplification and clarification 
of the regulatory framework should reduce the burden on businesses in terms of communication 
and information duties towards their customers. The clarification should also have a positive 
effect on consumers, in particular, leading to a reduced consumer detriment. 

80 

 
 
 
ANNEX 4: ANALYTICAL METHODS 

1)  Partial quantification 

The quantitative assessment was carried out for those impacts for which an assessment of costs 
and  benefits  could  be  made  given  the  complexity  of  a  measure  and  available  data.  This 
assessment  was  possible  for  three  main  sets  of  subjects:  public  administrations,  financial 
service providers and consumers. These measures, however, do not cover the full amount of 
costs and benefits that would be generated by the different policy options but only the ones for 
which a reasonable monetary estimation was feasible. 

The  quantification,  for  the  purposes  of  this  impact  assessment,  was  made  for  the  following 
indicators: 

For Public Authorities: 

  One-off adaptation costs for public authorities (transposition and adaptation costs) 

  Recurring enforcement and monitoring costs for public authorities. 

For Financial Service Providers: 

  One-off costs for financial service providers (including familiarisation costs, updating 

of IT systems, staff training, update of contractual documentation) 

  Recurrent  costs  for  financial  service  providers  (in  particular  cost  of  handling 

complaints, rules on use of robo-advisors, comparison platforms). 

  Recurrent  benefits  for  financial  service  providers  (specifically  the  reduction  of  the 

required communication to clients directly due to DMFSD). 

For consumers: 

  Reduction  of  consumers’  detriment  based  on  the  assessment  of  the  impact  on 

consumers’ detriment of the measures foreseen by the policy options. 

These estimates do not consider the potential indirect effects of the measures e.g. lost revenue 
for financial service providers as a result of the measure, degree to which these costs would 
then be transferred to consumers, implication regarding competition amongst financial service 
providers and other wider structural effects on employment, GDP and environmental. 

The estimates of the costs for the baseline scenario for the period 2022-2031 is consistent with 
the  approach  used  in  the  DMFSD  Evaluation  Study  published  in  2020  which  includes  the 
detailed approach used for the calculation of these impacts in a dedicated annex. 

Calculation approach 

For the purpose of better understanding the calculations, a summary table of the main costs and 
benefits and how they were estimated is provided below. 

For each figure in the calculation of the overall net benefits of the policy options, assumptions 
have been made. The main assumption is that the net benefit generated by the DMFSD in 2018 
(as calculated in the DMFSD evaluation study, 2020) will continue to be constant in case of no 
intervention. This was our baseline of comparison for all the potential benefits brought by the 

81 

 
individual measures since it was not possible to estimate which of the two main underlying 
forces driving the DMFSD net benefits would prevail: one of them is the decreasing relevance 
of the DMFSD due to future legislative interventions, the other is the increasing number of 
consumers that purchase financial services online.  

A second general assumption is that the average costs to adapt to new provisions merged in 
other, already existing Directives, would be less costly than adapting to a completely revised 
DMFSD. For this reason, and considering that Options 3(a) and 3(b) would implement less 
measures than Option 2, these costs have been accounted only by half. 

For the purpose of better understanding the calculations, a summary table of the main costs and 
benefits and how they were estimated is being provided. 

Table 15. Summary of the calculation methods for the monetisation of impacts 
Impact 

Description 

Cost for Public Authorities (PA) 

One-off costs 

Transposition costs were calculated assuming a minimum number of days of work by the 
PA, at daily wages, for 27 Member States. Implementation costs are based on the estimate 
made  in  the  DMFSD  evaluation  (2020),  adapted  at  current  prices,  and  multiplied  by 
Member State. The difference between Option 3a and 3b is that, while the first foresees the 
transposition  of  the  measures  in  one  “horizontal”  Directive,  the  second  foresees  the 
adaptation of multiple Directive and product specific legislation. However, this kind of cost, 
which would weight on the European institutions, has been considered as minimal thanks 
to internal procedures that would make these changes less burdensome. 

Recurrent costs 

Monitoring and Enforcement costs were calculated multiplying the number of days of work 
(as per DMFSD 2020 evaluation) at daily wage105 and for 27 Member States. A net present 
value  (NPV)  at  4%  discount  rate  was  then  calculated  for  the  period  2022-2031.  These 
recurrent  costs  include  the  monitoring  and  enforcement  activities  that  are  due  to  the 
additional provisions that are foreseen by the policy options.  

Financial Service Providers106 

One-off costs 

Recurrent costs 

The  one-off  costs  include  familiarisation  with  the  new  provisions,  the  update  of  the  IT 
systems and of internal documentation, and staff training.  
Familiarisation costs follow the approach of the DMFSD evaluation (2020) and result from 
the multiplication of the full-time equivalent (FTE) that would be involved in the revision 
activities, by the daily wage in financial services and the overall number of enterprises in 
EU (wages and number of enterprises are taken from Eurostat). 
Costs of update of the IT systems are assumed as the lower-bound estimate of the DMFSD 
evaluation and multiplied by the number of EU financial service providers with an average 
cost of 5.000 euros per company.  
Staff training is assumed to be involving between 5% and 20% of the workforce considering 
that the revised measures would involve only the staff that is responsible for sales and that 
is  in  direct  or  indirect  contact  with  customers.  The  training  costs,  however,  have  been 
accounted only for a fraction of the overall costs and in proportion to the relevance of the 
DMFSD as calculated in the evaluation study for the year 2018 (meaning that staff would 
not participate to a full day of training on the revised DMFSD or the updated regulatory 
framework, but that of that specific training, only a portion of it would be dedicated to these 
topics an in proportion to the estimated relevance of the DMFSD for consumer protection 
in financial services). 
Recurrent costs are all costs that financial service providers are expected to face on a yearly 
basis (from 2022 to 2031) to comply  with the revised DMFSD. These costs include, for 
example, handling complaints, comply with rules on provision of robo-advice, etc.  

105 Source of data: Eurostat ( EARN_GR_NACE2 ) for Financial Services  

82 

 
                                                           
 
Table 15. Summary of the calculation methods for the monetisation of impacts 
Recurrent benefits 

A reduction of cost is accounted as an increased benefit for financial services. As mentioned 
by  some  stakeholders,  financial  service  providers  provide  specific  documentation  and 
information in compliance with the DMFSD provisions. For this reason, a repeal or more 
in general a clarification of the application of the scope of the DMFSD, would likely remove 
these costs which would entail, mostly, the work of employees in preparing and setting up 
such communication (calculated as number of days of work at current cost). 

Consumers 

Consumer detriment 

Consumer benefits 

The  consumer  detriment  estimated  in  the  DMFSD  evaluation  study  for  2018  has  been 
extended for the 2022-2031 period considering a discount rate at 4%.  

A  consumer  benefit  is  calculated  as  a  reduction of  consumer  detriment  brought by  each 
measure considered in the Policy Options.  
The DMFSD evaluation study calculates that the net benefits of the DMFSD in the period 
2004-2018 were on average 3,7% annually107. To calculate consumer benefits, we estimated 
– based on stakeholders’ feedback - an expected increase of effectiveness brought by each 
policy  measure  and  calculated  it  as  the  difference  of  the  increased  effectiveness  in 
comparison to the baseline. For example, a measure that would strongly reduce problems 
for  consumers  regarding  the  right  of  withdrawal,  is  expected  to  increase  the  overall 
effectiveness and thus reduce by 50-80% the consumer detriment due to the ineffectiveness 
of the current DMFSD on this aspect. This gain is then calculated for the 2022-2031 period 
taking  into  account  the  expected  increase  in  number  of  consumers  performing  online 
purchases of financial services.  

The next table presents the allocation of the impacts to the considered policy options. These 
impacts are allocated in  consideration of the different  regulatory provisions foreseen by the 
policy options. 

Table16. Mapping of the costs and benefits for the assessment of the policy options 

Policy 
Option 1 

Policy 
Option 2 

Policy 
Option 
3a 

Policy 
Option 
3b 



















Costs for Public Authorities 

One-off cost: transposition/adaptation 

Recurrent cost: Monitoring 

Recurrent cost: Enforcement 

Costs and benefits for Financial 
services 

Familiarisation with new legislation 

  







Cost of updating/adapting IT systems to 
pre-contractual information requirements 

Updating contractual documentation 

  

  













107 i.e. the difference between the scenario with and without the DMFSD, the result is that the DMFSD generated a 
benefit 3,7% higher than the scenario without. 

83 

 
 
  
  
  
  
  
 
 
 
  
  
  
  
                                                           
Staff training (on pre-contractual and 
right of withdrawal) 

Recurrent costs of complaints handling 

Measures on robo-advice 

Recurrent benefit of reduced 
communications with clients 

Costs for Consumers 

Policy 
Option 1 

Policy 
Option 2 

Policy 
Option 
3a 

Policy 
Option 
3b 























Consumer detriment (EURm) 



Benefits for Consumers 

Clarification of the application of 
DMFSD 

Roboadvice (when intermediary/when 
not) 

Standardised information form 

Improve timing provision key info 

Specific withdrawal form 

Provision basic financial products 

Adapt information provision to channel 

Prohibition default options 

Cross-border trade 

  



































Both  costs  and  benefits  are  accounted  in  comparison  to  the  baseline  (Option  0:  Keep  the 
DMFSD as it is). The estimates are coherent with the methodology adopted for the DMFSD 
evaluation study (2020) and builds on its results. To be noted that while the expected impact of 
the individual policy measures foreseen by the policy options are calculated in terms of reduced 
consumer  detriment,  these  policy  measures  are  also  accounted  in  the  one-off  and  recurring 
costs for financial service providers. 

Based on the mapping of the different impacts for the stakeholders, the policy options can be 
compared based on their efficiency. Nevertheless, these estimates are only partial due to the 
lack of data on specific measures and on the effective size of the financial services in scope. In 
addition, the calculation cannot take into account, in monetary terms, of the value of “safety 
net” of having a horizontal legislation which covers current and future financial services. This 
limitation is, however, partially covered by the qualitative assessment. 

84 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
The quantitative assessment assumes a range of increased effectiveness of the individual policy 
measures:  a  lower  expected  effectiveness  determines  the  lower  bound,  while  the  higher 
expected effectiveness determines the higher one.  

Table17. Ranges of increased effectiveness brought by individual policy measures 

Policy Option 

Effectiveness score  Assumed 

increased 

Clarification of the application of DMFSD 

2, 3(a), 3(b) 

Roboadvice 

Standardised information form 

2 

2 

effectiveness 
measure 

Low 

High 

Low 

High 

++ 

++ 

+++ 

40,0%  60,0% 

+++ 

40,0%  60,0% 

+++ 

++++  60,0%  80,0% 

Improve timing provision key info 

2, 3(a), 3(b) 

++ 

++ 

40,0%  50,0% 

Specific withdrawal form 

Provision basic financial products 

2 

2 

Adapt information provision to channel 

3(a), 3(b) 

Prohibition default options 

Cross-border  trade:  increased  choice  for 
consumers 

3(a), 3(b) 

2, 3(a), 3(b) 

+++ 

++++  60,0%  80,0% 

++ 

+ 

++ 

++ 

+++ 

40,0%  60,0% 

++ 

20,0%  40,0% 

+++ 

40,0%  60,0% 

+++ 

40,0%  60,0% 

According to the monetary estimates of the efficiency, the policy options perform as reported 
in the next table. 

85 

 
 
 
 
 
Table18. Comparison of the efficiency of the policy options (EUR Million, NPV@4%, 2022-2031) – negative in parenthesis 

Policy Option 1  Policy Option 2 

Policy Option 3a  Policy Option 3b 

 Public Authorities 

One-off cost: transposition/adaptation 
Total one-off costs for PA 
Recurrent cost: Monitoring 
Recurrent cost: Enforcement 
Total recurrent costs for PA 
Total costs for PA (EURm)(A) 
Financial Services 
Familiarisation with new legislation 
Cost of updating/adapting IT systems to pre-contractual 
information requirements 
Updating contractual documentation 

Staff training on pre- contractual information 
Staff training on right of withdrawal 
Total one-off costs for FS 
Recurrent cost: complaint handling (banking) 
Recurrent cost: complaint handling (Insurance) 
Measures on robo-advice 
Total recurring costs for FS 
Total costs for FS (EURm) 
Reduced communication 
Total benefits for FS (EURm) 
Net costs for FS (EURm) (B) 
Consumers 
Consumer detriment (EURm) (C) 

0,0 
0,0 
0,0 
0,0 
0,0 
0,0 

(90,3) 
0,0 

0,0 

0,0 
0,0 
(90,3) 
0,0 
0,0 
0,0 
0,0 
(90,3) 
97,7 
97,7 
7,4 

(560) 

86 

(1,6) 
 (1,6) 
(6,8) 
(3,4) 
(10,2) 
(11,8) 

(90,3) 
(52,1) 

(60,2) 

(2,0) 
(2,1) 
(206,7) 
(13,7) 
(13,6) 
(35,0) 
62,3 
(269,0) 
0,0 
0,0 
(269,0) 

(0,8) 
(0,8) 
(3,4) 
(1,7) 
(5,1) 
(5,9) 

(45,2) 
(26,1) 

(30,1) 

(1,0) 
(1,0) 
(103,4) 
(6,8) 
(6,8) 
0,0 
13,7 
(117,0) 
97,7 
97,7 
(19,3) 

(0,8) 
(0,8) 
(3,4) 
(1,7) 
(5,1) 
(5,9) 

(45,2) 
(26,1) 

(30,1) 

(1,0) 
(1,0) 
(103,4) 
(6,8) 
(6,8) 
0,0 
13,7 
(117,0) 
97,7 
97,7 
(19,3) 

 
  
  
  
  
Impact of measures (lower bound) 
Clarification of the application of DMFSD 
Roboadvice (when intermediary/when not) 
Standardised information form 
Improve timing provision key info 
Specific withdrawal form 
Provision basic financial products 
Adapt information provision to channel 
Prohibition default options 
Cross-border trade: increase options for consumers 
Total consumer benefits (lower bound) (D) 
Total estimates (lower bound) (A+B+C+D) 
Impact of measures (higher bound) 
Clarification of the application of DMFSD 
Roboadvice (when intermediary/when not) 

Standardised information form 
Improve timing provision key info 
Specific withdrawal form 
Provision basic financial products 
Adapt information provision to channel 
Prohibition default options 
Cross-border trade: increase options for consumers 
Total consumer benefits (higher bound) (E) 
Total estimates (higher bound) (A+B+C+E) 

Policy Option 1  Policy Option 2 

Policy Option 3a  Policy Option 3b 

21  
20  
48  
39  
48  
42  
0  
0  
36  
255  
26  

24 
23 

54 
45 
54 
48 
0 
0 
48 
297 
16 

42  
0  
0  
39  
0  
0  
36  
42  
36  
195  
170  

48 
0 

0 
45 
0 
0 
42 
48 
48 
231 
206 € 

38  
0  
0  
35  
0  
0  
32  
38  
32  
176  
151  

43 
0 

0 
41 
0 
0 
38 
43 
43 
208 
183 € 

42  
0  
0  
0  
0  
0  
0  
0  
0  
42  
510  

48 
0 

0 
0 
0 
0 
0 
0 
0 
48 
(504) 

87 

 
  
  
  
  
  
  
  
  
  
Each  policy  option  would  generate  costs  and  benefits  for  the  different  categories  of 
stakeholders. In particular: 

  Policy Option 1: Repeal of the DMFSD – this policy option would generate a total 
cost estimated above 500 Million euros in consumer detriment as a result of the loss of 
the expected benefits of the DMFSD (baseline). These costs, however, could be reduced 
in case of effective self-regulation of the industry (not monetised) or increase in case of 
national law to reduce consumer protection due to the absence of the DMFSD at EU 
level. 

  Policy Option 2: Improve the DMFSD based on identified issues (Comprehensive 
revision) – this policy option, according to our calculations, would generate a positive 
net benefit in the period 2022-2031. This policy option foresees an increased burden 
for  financial  services  providers  which  should  be  compensated  by  the  increase  of 
consumer  protection.  This  small  positive  net  benefit  calculated  in  our  estimates, 
however, could easily also be a negative net cost in case of slightly higher costs for 
businesses or lower benefits for consumers. 

  Policy  Options  3(a)  and  3(b):  Repeal,  modernisation  of  relevant  provisions 
introduced in horizontal legislation – these policy options are the most balanced in 
terms  of  efficiency  amongst  the  ones  taken  into  consideration.  According  to  the 
monetised impacts, these options would generate a moderate level of costs for public 
authorities and financial services while bringing a relatively high reduction of consumer 
detriment generating a positive net benefit in the period taken into account. Of the two 
options, however, the benefits for policy option 3(b) have been accounted not fully (at 
90% of their value) to take into account of the absence of the “safety net” feature of the 
DMFSD or that a horizontal consumer protection legislation would bring. 

The quantitative assessment is complemented by a qualitative assessment of the policy options 
resulting  from  the  consultation  with  several  stakeholders  directly  consulted  on  the  specific 
policy  options  during  the  validation  workshop  and  taking  into  account  the  quantitative 
assessment. The qualitative consultation allows for a stronger differentiation of the analysed 
policy options. 

88 

 
 
 
 
 
2)  Description of the analytical methods  

This  annex  provides  a  description  of  the  approach  to  estimate  the  impacts  on  consumers, 
financial  providers  and  public  authorities  of  the  proposed  policy  options  attributable  to  the 
DMFSD in a 10 year timeframe (2022-2031). These approaches are consistent and build on the 
assessments made for the evaluation study of the DMFSD published in 2020. 

The methodology  follows the Better Regulation  Guidelines and the accompanying Toolbox 
(such as Tool #32 Consumers; Tool #58 Typology of costs and benefits; Tool #59 Methods to 
assess  costs  and  benefits;  Tool  #60  The  standard  cost  model  for  estimating  administrative 
costs)108. 

Table 19. Market evolution 

Market evolution is based on Eurostat data109 on the percentage of the population aged 
between 16 and 74 that has purchased at least one financial service over the internet for 
the period 2016-2019 and on the percentage of population aged between 16 and 74 that 
has carried out at least one of the financial activities over the internet. 

Data have then been estimated for the period 2022-2031 based on a linear regression.  

2021 

2022 

2023 

2024 

2025 

2026 

2027 

2028 

2029 

2030 

2031 

6%  6%  7% 

7% 

7% 

8% 

8% 

8% 

8% 

9% 

9% 

18%  20%  22%  23%  25%  27%  28%  30%  32%  34%  35% 

Online  purchase 
of FS 

Financial 
Activities 

According to these estimates, the number of individuals that purchase financial services online, 
should increase (assuming the same trend of the last 10 years) to 27 million users by 2031. 

The  impacts  that  have  been  taken  into  account  for  both  the  qualitative  and  quantitative 
efficiency assessment are the following: 

For Public Authorities: 

  One-off adaptation costs for the adaptation and redress activities 

  Recurring enforcement and monitoring costs 

For Financial Service Providers: 

  One-off  costs  including  familiarisation  costs,  updating  of  IT  systems,  staff  training, 

update of contractual documentation, adaptation of complaint mechanisms 

  Recurrent  costs  including  compliance  with  measures  on  pre-contractual  information 
requirements, right of withdrawal, rules on use of robo-advisors, comparison platforms 

For consumers: 

108 European Commission (2015). Better Regulation Guidelines. 
109 Eurostat, Internet purchases by individuals (until 2019) and Financial activities over the internet (until 2019). 

89 

 
  
 
                                                           
  Reduction of consumers’ detriment 

 

Impacts of the measures foreseen in the policy options 

These  impacts  have  been  assessed  mainly  in  a  qualitative  manner,  and  where  possible, 
complemented with the quantitative assessment. All these impacts can both be considered as 
benefits or costs depending on the sign of the impact: a negative impact increases costs while 
a positive impact can be considered a benefit causing a reduction of costs in comparison to the 
baseline. 

Estimates of impacts for public authorities 

The impact on public authorities was calculated for the following areas: 

  One-off implementation/adaptation costs 

  Monitoring activities 

  Enforcement activities 

The table below describes the methodology and the assumptions adopted in accordance with 
the ones adopted for the DMFSD evaluation (2020). The costs are calculated at 2020 prices 
and, for recurrent costs, at net present value (4%) for the period 2022-2031. 

Table 20. 

Transposition costs 

Methodology 

Assumptions 

Unit cost = No. of people 
involved in the task x No. of 
days per person x Average 
daily wage for the public 
sector 

Total cost = Unit cost x 27 
Member States 

  3 officials per 

Member state for 
10 days per month 
for 12 months 

  Average daily 

wage for the public 
sector per 
country110 (from 
Eurostat) 

  4 officials per 

Member State for 4 
days per month 

  Average daily 

wage for the public 
sector111 (from 
Eurostat) 

Recurrent cost: Monitoring  Unit cost = No. of people involved 
in the task x No. of days per person 
x Average daily wage for the 
public sector 

Total cost = Unit cost x 27 
Member States 

110 Labour cost levels by NACE Rev. 2 activity (online data code: LC_LCI_LEV ) 

111 Ibid. 

90 

 
 
 
                                                           
  Recurrent cost: Enforcement 

Unit cost = No. of people 
involved in the task x No. of 
days per person x Average 
daily wage for the public 
sector 

Total cost = Unit cost x 27 
Member States 

  4 officials per 

Member State for 2 
days per month 

  Average daily 

wage for the public 
sector112 (from 
Eurostat) 

Estimates of impacts on financial service providers 

The impact on financial service provides was calculated for the following areas: 

One-off costs: 

  Familiarisation with the Directive 

  Cost of updating/adapting IT systems 

  Staff training on pre- contractual information 

  Staff training on right of withdrawal 

  Updating contractual documentation 

The table below describes the methodology and the assumptions adopted in accordance with 
the ones adopted for the DMFSD evaluation (2020). The costs are calculated at 2020 prices 
and, for recurrent costs, at net present value (4%) for the period 2022-2031. 

Table 21 

Methodology 

Assumptions 

Familiarisation with the 
Directive 

Unit cost = No. of people 
involve in the task x No. of 
days per person x Average 
daily wage for the financial 
sector 
Total cost = Unit cost x 
number of financial 
institutions 

  2 staff members 
per financial 
institution for 15 
days per staff 
member 
  Average daily 
wage for the 
financial sector113 
(from Eurostat) 

  Number of 
financial 
institutions114 

112 Ibid. 

113 Ibid. 

114 Annual detailed enterprise statistics for services (NACE Rev. 2 H-N and S95) [sbs_na_1a_se_r2] 

91 

 
 
 
 
                                                           
Table 21 

Methodology 

Assumptions 

(from Eurostat) 

  Eur 5,000 per 
institution 
  Number of 
financial 
institutions115  
(from Eurostat)  
  Communication/tra
ining takes 1 day 

  All front office 
employees 
(assumed to be 
20% of workforce 
undergo training) 

  Average daily 
wage for the 
financial sector 
(from Eurostat) 

  Number of 
financial 
institutions (from 
Eurostat) 
  Values for 

attribution and 
compliance 

  Communication/tra
ining takes 1 day 

  All front office 
employees 
(assumed to be 
20% of workforce 
undergo training) 

  Average daily 
wage for the 
financial sector 
(from Eurostat) 

  Number of 
financial 
institutions (from 
Eurostat) 

Cost of updating/adapting IT 
systems 

Staff training on pre-
contractual information 

Unit cost = Average cost of 
updating/adapting the IT 
system 
Total cost = Unit cost x 
number of financial 
institutions  
Unit cost = No. of people 
involved x No. of days per 
person x Average daily 
wage in the financial sector 
Total cost = Unit cost x 
number of financial 
institutions x share of 
financial institutions that 
needed to adapt to this 
requirement 

Staff training on right of 
withdrawal 

Unit cost = No. of people 
involved x No. of days per 
person x Average daily 
wage in the financial sector 
Total cost = Unit cost x 
number of financial 
institutions x share of 
financial institutions that 
needed to adapt to this 
requirement 

115 Ibid. 

92 

 
                                                           
Table 21 

Methodology 

Updating contractual 
documentation 

Unit cost = No. of people 
involved x No. of days per 
person x Average daily 
wage for the financial sector 
Total costs = Unit cost x 
number of financial 
institutions 

Reduced communication 

Unit cost = No. of people 
involve x No. of days per 
person x Average daily 
wage for the financial sector 

Assumptions 

  Values for 

attribution and 
compliance 

  2 members of legal 

team 

  10 days per team 

member 
  Average daily 
wage for the 
financial sector 
(from Eurostat) 

  Number of 
financial 
institutions (from 
Eurostat) 
  2 members 
  2 days per team 

member 
  Average daily 
wage for the 
financial sector 
(from Eurostat) 

  Number of 
financial 
institutions (from 
Eurostat) 

Recurring costs for financial providers are related to the need to comply with the DMFSD and 
depend on their level of compliance with the Directive and their need to adjust their operations. 
The approach taken to calculate these costs is based on the estimates made for the DMFSD 
evaluation study, updated to 2020 prices. The overall costs are calculated at net present value 
(at a 4% discount rate) for the period 2022 – 2031.  

To the recurring costs, two measures were also taken into account: 

 

Introduction of rules on robo-advice: which foresee that there is human intervention if 
requested by the consumer; consumer not to be exploited due to their relative lack of 
knowledge  about  financial  products  and  their  dependence  on  the  product  providers; 
ensure that robo-advice provides advise that meets best the demands of the consumer 
in an honest and transparent manner 

 

Introduction of independent comparison websites and extended to all financial services. 

93 

 
 
Regarding  the  comparison  websites,  the  impact  assessment  study  of  the  Payment Accounts 
Directive116 mentioned that, for those services in which data are already collected, the costs for 
the implementation of comparison websites is negligible. 

Regarding the estimation of cost of the rules on robo-advice, based on the figures provided by 
a 2020 study,117 the overall number of users in Europe of these services amount to 10,5 million. 
It is possible to estimate that, at a 4% problem rate (as calculated for investment activities for 
2018 in the evaluation report) for which the intervention of a ‘human’ operator is required, the 
net present value of such provision for the period 2022-2031 would be around 35 million euros. 

Benefits are calculated in terms of reduced communication with clients due to DMFSD directly 
since some stakeholders mentioned they have specific communication with customers based 
on information related to the DMFSD in duplication with the communication due to the product 
specific  regulation.  In  general,  it  is  assumed  that  communication  with  clients  would  be 
amended and that adaptation of this with DMFSD would be removed with the repeal of the 
Directive (which would occur for the policy options 1, 3(a) and 3(b) only). 

Estimates of impacts on consumers 

The  main  purpose  of  the  DMFSD  is  to  ensure  a  better  protection  of  the  EU  consumers  in 
distance marketing which in turn leads to a lower consumer detriment (possible due to a lower 
incidence rate of problems and a lower magnitude) and to an increase in demand for financial 
services; 

Our research conducted as part of the DMFSD Evaluation (2020) showed that the DMFSD had 
an impact on increasing consumer protection with net benefits ranging between 69 and 427 
million euros (at 2018 prices). On the other hand, the evaluation did not find hard evidence that 
changes  in  the  demand  or  supply  of  consumer  credit  products  can  be  directly  attributed  to 
DMFSD (including cross-border activities). Consequently, the same assumption is used as part 
of this study, and we will quantify the impact of the DMFSD on the reduction of consumer 
personal detriment only, while the cross-border effect is estimated in terms of overall potential 
percentage increase, but not in monetary terms. 

Reduction of personal detriment 

Personal detriment refers to loss of welfare experienced by individuals due to problems that 
occur  after  the  purchase  and  that  were  not  expected  (based  on  reasonable  expectations). 
Personal detriment includes financial and non-financial losses (e.g. time losses, psychological 
detriment). 

The  DMFSD  Evaluation  (2020)  found  that  due  to  various  factors,  consumer  detriment  was 
reduced in most of the EU 28 Member States since 2004. The attribution of such effect to the 
DMFSD, however, declined through the years due to the decreasing relevant of the Directive 
thanks to products specific and more recent horizontal legislation. 

116  Study  on  EU  payment  accounts  market,  2021.  Available  at:  https://op.europa.eu/en/publication-detail/-
/publication/0854f727-6117-11eb-8146-01aa75ed71a1/language-en.  
117 Better Finance (2020).  

94 

 
                                                           
As of 2018, the calculated attribution to the DMFSD in the evaluation study is reported in the 
table below. 

Table 22. Attribution rates as of 2018 according to DMFSD evaluation (2020) 

Banking products  

Mortgage  

Credit / loans  

Insurance  

Pensions  

Payment services  

Investments  

Attribution  on 
pre-contractual 
information 

Rights 
withdrawal 

of 

Unsolicited 
communication 
and services 

2.6%  

0.0%  

0.7%  

1.7%  

6.5%  

0.0%  

0.7%  

3.9% 

1.1% 

1.0% 

2.5% 

4.1% 

0.0% 

0.3% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

As of 2018 the DMFSD was mainly having a relevance for consumers in the banking products 
and in the pensions sectors. However, e with the introduction of the PEPP Regulation (PEPP) 
in 2022 it may be expected that the DMFSD’s relevance might decrease. Other legislations in 
financial services, such as the Proposal to amend the Consumer Credit Directive of 2021 might 
further decrease the relevance of the DMFSD. 

The DMFSD evaluation study measures the overall net benefit of a scenario with the DMFSD 
to  be  3,7%  higher  (for  2018)  in  comparison  to  a  scenario  without  the  DMFSD.  Thus,  it  is 
possible to estimate the baseline effectiveness of the DMFSD, with the assumption that such 
effectiveness would not decrease without changes in the Directive, for the period 2022-2031. 
At a discount rate of 4%, the overall net benefit of the DMFSD would account to 560 Million 
euros. 

Assessment of the increased effectiveness of the policy measures 

The  fundamental  assumption  adopted  to  estimate  the  monetary  impact  of  the  proposed 
measures,  is  that  an  increase  effectiveness  would  also  bring  a  reduction  of  the  consumer 
detriment. 

Based on qualitative data collected through interviews, open public consultation, survey and 
the validation workshop, for each measure a potential percentage increase of the effectiveness 
of  the  policy  options  has  been  assigned.  The  increase  effectiveness  is  then  estimated  in 
proportion to the overall impacted population (as estimated by the DMFSD Evaluation, 2020). 

The difference between the NPV of the gained efficiency and the baseline allows for a rough 
estimate  of  the  monetary  net  benefit  of  the  measures.  The  table  below  summarise  this 
assessment  in  the  assumption  of  a  lower  effectiveness  score  (lower  bound)  and  a  higher 
effectiveness score (higher bound): 

95 

 
 
 
 
Table 23. Estimate of impact on consumer benefit of proposed policy options (lower and higher bound) 

LOWER 
BOUND 

Effectiveness 
score 

Assumed 
increased 
effectiveness 
measure 

++ 

40.0% 

Overall 
increase 
of 
Consumer 
protection 
5.2% 

Impacted 
population 

Annual 
decrease 
consumer 
detriment 

NPV(4%) 

Baseline 
(NPV 
4%) 

Net 
benefit 
(EURm) 

21,788,452 

104.69 € 

849.11 € 

807 € 

42 € 

++ 

+++ 

40.0% 

5.2% 

10,500,000 

102.00 € 

827.31 € 

807 € 

20 € 

60.0% 

6.0% 

21,788,452 

105.43 € 

855.13 € 

807 € 

48 € 

++ 

40.0% 

5.2% 

21,788,452 

104.69 € 

849.11 € 

807 € 

42 € 

+++ 

60.0% 

6.0% 

21,788,452 

105.43 € 

855.13 € 

807 € 

48 € 

++ 

+ 

++ 

++ 

40.0% 

5.2% 

21,788,452 

104.69 € 

849.11 € 

807 € 

42 € 

20.0% 

4.5% 

21,788,452 

103.95 € 

843.10 € 

807 € 

36 € 

40.0% 

5.2% 

21,788,452 

104.69 € 

849.11 € 

807 € 

42 € 

40.0% 

5.2% 

21,788,452 

104.69 € 

849.11 € 

807 € 

42 € 

HIGER 
BOUND 

Effectiveness 
score 

Assumed 
increased 
effectiveness 
measure 

+++ 

60.0% 

Overall 
increase 
of 
Consumer 
protection 
6.0% 

Impacted 
population 

Annual 
decrease 
consumer 
detriment 

NPV(4%) 

Baseline 
(NPV 
4%) 

Net 
benefit 
(EURm) 

21,788,452 

105.43 € 

855.13 € 

807 € 

48 € 

+++ 

60.0% 

6.0% 

10,500,000 

102.36 € 

830.21 € 

807 € 

23 € 

++++ 

80.0% 

6.7% 

21,788,452 

106.17 € 

861.14 € 

807 € 

54 € 

++ 

50.0% 

5.6% 

21,788,452 

105.06 € 

852.12 € 

807 € 

45 € 

96 

Clarification 
of the 
application of 
DMFSD 
Roboadvice 

Standardised 
information 
form 
Improve 
timing 
provision key 
info 
Specific 
withdrawal 
form 
Provision 
basic financial 
products 
Adapt 
information 
provision to 
channel 
Prohibition 
default 
options 
Cross-border 
trade 

Clarification 
of the 
application of 
DMFSD 
Roboadvice 

Standardised 
information 
form 
Improve 
timing 

 
 
 
provision key 
info 

Specific 
withdrawal 
form 
Provision 
basic financial 
products 
Adapt 
information 
provision to 
channel 
Prohibition 
default 
options 
Cross-border 
trade 

++++ 

80.0% 

6.7% 

21,788,452 

106.17 € 

861.14 € 

807 € 

54 € 

+++ 

60.0% 

6.0% 

21,788,452 

105.43 € 

855.13 € 

807 € 

48 € 

++ 

40.0% 

5.2% 

21,788,452 

104.69 € 

849.11 € 

807 € 

42 € 

+++ 

60.0% 

6.0% 

21,788,452 

105.43 € 

855.13 € 

807 € 

48 € 

+++ 

60.0% 

6.0% 

21,788,452 

105.43 € 

855.13 € 

807 € 

48 € 

The net benefit attributed to these measures is then used to estimate the overall impact of the 
analysed policy options under these two scenarios. 

97 

 
 
 
 
 
 
ANNEX 5. PROBLEM TREE 

Drivers 

Driver 1: Lack of legal clarity:  

(a)  Over-lap with specific 

horizontal (need to define the 
lex specialis/lex generalis 
relationship); 

(b)  some definitions or terms in 
the Directive are too vague 

Driver 2: Developments in 
consumer behavior, often 
exploited by providers, making 
regulatory framework 
inadequate (e.g. pre-ticked 
boxes) 

Driver 3: Emergence of new 
distribution channels and 
financial services due to 
increased digitalisation (e.g. fax 
machine no longer preferred 
channel) 

Problems 

Consequences 

Problem 1: Lack of coherence and decreased relevance 
of the DMFSD due to overlap with product-specific and 
horizontal legislation 

Consumers who suffer 
detriment have less trust 
in the market 

Problem 2: Consumers taking out financial services by 
means of distance communication are not sufficiently 
protected and face detriment 

Sub-problem 2.1: Limited consumer awareness of key elements 
and costs of some financial services (e.g. pre-contractual 
information is not presented in a clear way)) 

Sub-problem 2.2: sub-optimal use of the right of withdrawal  

Sub-problem 2.3: New market practices exploiting patterns in 
consumer behavior (pre-ticked boxes) 

Problem 3: The competitiveness of the internal market 
for financial services sold by means of distance 
communication is not fully achieved due to barriers to 
the provision of financial services across borders 

98 

Consumers (without 
detriment) do not take 
financial products 
because they have 
limited trust (loss of 
welfare) 

Unfair competition as not 
all suppliers play by the 
same rules 

Not realized potential of 
the internal market (loss 
of welfare) 

Unnecessary compliance 
costs for businesses 

 
 
 
 
 
 
 
ANNEX  6  INTERACTION  OF  DMFSD  WITH  EXISTING  LEGISLATION  AND  ON-GOING 
INITIATIVES 

(i) Since DMFSD was enacted in 2002, the EU legislators have adopted several product-
specific and horizontal legislations that have directly or indirectly impacted the relevance of 
DMFSD. The following table presents the main legislations and ongoing initiatives which 
interact with the scope of application of the DMFSD. 

Table 24. Interaction with existing legislation and upcoming initiatives 

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Product-specific legislation 

Consumer Credit Directive (CCD, 2008/48/EC) 

2010 

✓ 

Mortgage Credit Directive (MCD, 2014/17/EU) 

2016 

✓ 

Payment Accounts Directive (PAD, 2014/92/EU) 

2016 

Payment Services Directive (PSD II, 2015/2366) 

2018 

Solvency II Directive (Solvency II, 2009/138/EC) 

2016 

Insurance Distribution Directive (IDD, 2016/97) 

2018 

Market in Financial Instruments Directive (MiFID, 
2014/65/EU) 

2017 

Undertakings for the collective investment in 
transferable securities Directive (UCITS, 2009/65/EC) 

2011 

Prospectus Regulation (2017/1129) 

Alternative investment fund managers Directive 
(AIFMD, 2011/61/EU) 

EU Regulation 1286/2014 on packaged retail and 
insurance-based investment products (PRIIPs) 

2019 

2013 

2018 

99 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Directive on deposit guarantee schemes (2014/49/EU) 2016 

Pan-European personal pension product (PEPP)  

2020 

 Crowdfunding Regulation (2020/1503) 

2020 

Horizontal legislation 

e-commerce Directive (ECD) 

ePrivacy Directive (EPD) 

2002 

2003 

Unfair Commercial Practices Directive (UCPD) 

2007 

Consumer Rights Directive 

2014 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

General Data Protection Regulation (GDPR) 

2018 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

✓ 

Geo-blocking Regulation 

2018 

Ongoing Negotiations of Product Specific Legislation 

Proposal to Revise the Consumer Credit Directive 
(CCD,) 

2021 

✓ 

Proposal for a Regulation on Markets in Crypto-assets 
(MICA,) 

2021 

Revision of Solvency II  

2021 

✓ 

✓ 

(ii) Interaction and interplay between the rights laid down in the DMFSD and product-specific 
legislation: an example for one of the financial services sector (insurance) 

To  complement  the  example  set  out  in  the  box  in  Section  1.2  concerning  the  interaction 
between  the  DMFSD  and  product-specific  legislation,  which  concerned  the  consumer  loan 
sector, the following example, from the insurance sector, may serve as a model to explain the 
interaction with regard to the right of pre-contractual information and the right of withdrawal. 

Insurance sector: 

The  main  pieces  of  legislation  in  the  insurance  sector  are  Solvency  II,  EU  Regulation 
1286/2014  on  packaged  retail  and  insurance-based  investment  products  (PRIIPs)  and  the 
Insurance Distribution Directive.  

With  regard  to  pre-contractual  information,  the  requirements  set  out  in  the  sectoral 
legislations  are  equal  or  more  detailed  than  the  ones  laid  down  in  the  DMFSD.  Thus, 
whenever  sectoral  legislations  apply,  the  respective  product-specific  legislation  applies. 
However, in insurance products that do not fall under these product-specific legislation, the 
DMFSD would apply. 

100 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
With regard to the right of withdrawal, neither the PRIIPs nor the IDD provide a right of 
withdrawal. The rules concerning the right of withdrawal stem from the DMFSD (Article 
6). Thus, by way of example, the right of withdrawal for packaged retail and insurance-based 
investment products stems from the DMFSD. 

The Commission proposal to revise Solvency II proposes to exclude small insurance firms 
from the scope of application of Solvency II, thus meaning that, whenever these excluded 
insurance firms provide insurance products contracted by means of distance communication, 
the DMFSD would apply. 

EIOPA, in the Consumer Trends Report 2019, has remarked that financial  innovation 
created by digitalisation has presented challenges to identify what is within and outside the 
scope of the IDD. Considering the relevance of the DMFSD in this sector, in particular as 
regards  the  right  of  withdrawal,  this  trend  might  require  additional  attention  in  order  to 
ensure a high level of consumer protection and the fostering of the provision of insurance 
products cross-border. 

Likewise,  a  number  of  innovative  insurance  products  sold  online  are  appearing  on  the 
market, sold by Bigtech companies, such as by Amazon in Germany. In case these products 
do not  fall under one of these three product-specific legislation, the DMFSD, through its 
safety net, would apply. 

101 

 
 
 
 
 
 
 
Figure  3  Overview  of  the  evolution  of  the  attribution  of  achievements  related  to  the 
provision of pre-contractual information 

Source: ICF (2020) 

Figure  4  Overview  of  the  evolution  of  the  attribution  of  achievements  related  to  the 
provision on right of withdrawal 

Source: ICF (2020) 

102 

Achievements mostly attributable to DMFSDAchievements partially attributable to DMFSDAchievements mostly non-attributable to DMFSDAchievements  non-attributable to DMFSDAchievements mostly attributable to DMFSDAchievements partially attributable to DMFSDAchievements mostly non-attributable to DMFSDAchievements  non-attributable to DMFSD 
 
 
 
 
 
ANNEX  7  EXAMPLES  OF  INDUSTRY  MISLEADING  AND  UNFAIR  PRACTICES  AT  ADVERTISING 

AND PRE-CONTRACTUAL STAGES 

Table 25. Examples of misleading and unfair practices at advertising and pre-contractual stages 

Practice 

Advertisement 
stage 

Pre-contractual 
stage 

Way in which information is provided 

Benefits emphasised while costs are hidden or given lower prominence  

Key information missing or difficult to find 

Information complex and difficult to understand e.g. because of use of 
jargon or complex terms 

Information layered and located in places that can be overlooked 

Information format not adapted to the medium used 

Features which may accelerate consumer's purchase decision 

Speedy or ‘one-click’ products (a fast purchasing process, e.g. in under 
15 minutes) 

Promotional offers and consumer incentives, sometimes of a time-limited 
nature 

Design of the offers 

Pre-ticked boxes, with recommended add-on products 

Product bundling, e.g. a bank account offered with travel insurance 

Consumer targeting and personalisation 

 

 

 

 

Targeting and personalisation i.e. content targeted to specific audiences 
or personalised based on individual characteristics 

 

Price discrimination i.e. charge consumers differently depending on their 
characteristics, in a way that may not be clear from the pricing structure 

Tools made available to consumers to assist their decision-making 
process 

Positive consumer reviews displayed prominently to create the 
impression of a highly desirable product 

Product-tailored contact sections: lack of product-specific contact 
information sections 

 

 

Source: LE Europe (2019) 

 

 

 

 

 

 

 

 

 

 

 

 

 

103 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX  8  BACKGROUND  INFORMATION  ON  FINANCIAL  SERVICES  PRODUCTS  SOLD  AT  A 

DISTANCE 

Figure 5. Distribution of the total distance purchases in the last 5 years per type of product 

Figure 6. How was the distance contract negotiated? 

104 

 
 
 
 
 
 
ANNEX 9 GLOSSARY 

Term or acronym 

Meaning or definition118 

Bank 

Behavioural biases 

Chatbot 

Cold calling 

Comparison tools 

A financial institution one of whose principal activities is to take deposits 
and borrow with the objective of lending and investing and which is within 
the scope of banking or similar legislation.119 

Individuals' choices may vary systematically according to specific aspects 
of the decisions they  face and/or the context in  which their decisions are 
made. In such cases, market forces will not achieve an efficient outcome.120 

A  computer  program  that  simulates  human  conversation  through  voice 
commands or text chats or both.121 

A  technique  in  which  a  salesperson  contacts  individuals  who  have  not 
previously  expressed  interest  in  the  offered  products  or  services.  Cold 
calling  typically  refers  to  solicitation  by  phone  or  telemarketing,  but  can 
also involve in-person visits, such as with door-to-door salespeople.122 

All  digital  content  and  applications  developed  to  be  used  by  consumers 
primarily  to  compare  products  and  services  online,  irrespective  of  the 
device used (e.g. laptop, smartphone, tablet) or the parameter(s) on which 
the comparison is based (e.g. price, quality, user reviews).123 

Consolidator website 

Websites that sell products or services from a variety of suppliers directly 
to consumers. 

Consumer  

Consumer Credit 

Consumer detriment  

Cybercrime 

Credit Agreement 

A natural person who in a contract or transaction acts for purposes which 
are outside his trade, business or profession 

Loans  granted  to  households,  which  in  the  case  of  these  transactions  are 
acting for purposes outside their business and profession. Mortgage loans 
for financing house building or buying (amongst others bridging loans) are 
excluded.  It  is  the  intention  that  consumer  credit  relates  exclusively  to 
credits used for buying goods and/or services which are consumed by the 
households individually.124 

A measure of harm that consumers may experience when market outcomes 
fall  short  of  their  potential.  Consumer  detriment  can  be  structural  or 
personal.125 

Criminal  acts 
communications networks and information systems.126 

that  are  committed  online  by  using  electronic 

An agreement whereby a creditor grants or promises to grant to a consumer 
credit  in  the  form  of  a  deferred  payment,  loan  or  other  similar  financial 
accommodation, except for agreements  for the provision on a continuing 

118 Most of the definitions in this section were taken directly from the referenced sources (text is in italic). 
119 IASCF, Key term list; Commission Regulation (EC) No 1126/2008 (international accounting standards). 
120 European Commission, 2015. Better Regulation Toolbox [SWD (2015) 111]. 
121 https://www.investopedia.com/terms/c/chatbot.asp 
122 https://www.investopedia.com/terms/c/coldcalling.asp 
123 https://ec.europa.eu/info/sites/info/files/key_principles_for_comparison_tools_en.pdf 
124 Eurostat, "European System of Accounts - ESA 1995", Office for Official Publications of the European Communities, 
Luxembourg, 1996 
125 European Commission, 2015. Better Regulation Toolbox [SWD (2015) 111]. 
126 https://ec.europa.eu/home-affairs/what-we-do/policies/cybercrime_en 

105 

 
                                                           
Credit Card 

Credit institution 

Cross-selling practice 

Crowdfunding 

Cryptocurrencies 

Digital literacy 

Digital wallet or e-wallet 

Distance contract 

Durable medium 

basis  of  services  or  for  the  supply  of  goods  of  the  same  kind,  where  the 
consumer pays for such services or goods for the duration of their provision 
by means of instalments.127 

A card entitling the owner to use funds from the issuing company up to a 
certain limit. The holder of a credit card may use it to buy a good or service. 
When one does this, the issuing company effectively gives the card holder 
a loan for the amount of the good or service, which the holder is expected 
to repay.128 

An undertaking the business of which is to take deposits or other repayable 
funds from the public and to grant credits for its own account.129 

The  practice  of  offering  of  an  investment  service  together  with  another 
service  or  product  as  part  of  a  package  or  as  a  condition  for  the  same 
agreement or package.130 

The  practice  of  funding  a  project  or  venture  by  raising  monetary 
contributions  from  a  large  number  of  people.  It  is  often  performed  via 
internet-mediated registries that facilitate money collection for the borrower 
(lending) or issuer (equity).131 

A virtual currency that is secured by cryptography, which makes it nearly 
impossible to counterfeit or double-spend.132 

The ability to use digital technology, communication tools and/or networks 
appropriately  to  solve  information  problems  in  order  to  function  in  an 
information society.133 

An electronic device, website, software system, or database that facilitates 
commercial  transactions  by  storing  a  consumer's  credit  card,  shipping 
address, and other payment data.134 

Any contract concerning  financial  services concluded between a supplier 
and  a  consumer  under  an  organised  distance  sales  or  service-provision 
scheme run by the supplier, who, for the purpose of that contract,  makes 
exclusive use of one or more means of distance communication up to and 
including the time at which the contract is concluded.135 

Any instrument which enables the consumer to store information addressed 
personally to him in a way accessible for future reference for a period of 
time  adequate  for  the  purposes  of  the  information  and  which  allows  the 
unchanged reproduction of the information stored.136 

127 Consumer Credit Directive (2008/48/EC). 
128 Farlex Financial Dictionary, 2012. 
129  Regulation  (EU)  no  575/2013  of  the  European  parliament  and  of  the  council  of  26  June  2013  on  prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 
130  Directive  2014/65/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  on  markets  in  financial 
instruments and amending Directive 2002/92/EC and Directive 2011/61/EU. 
131 European Banking Authority, Glossary for financial innovation. 
132 https://www.investopedia.com/terms/c/cryptocurrency.asp 
133  Knobel,  M.  and  Lankshear,  C.,  2006.  Digital  literacy  and  digital  literacies:  Policy,  pedagogy  and  research 
considerations for education. Nordic Journal of digital literacy, 1(01), pp.12-24. 
134 https://www.dictionary.com/browse/e-wallet 
135 Distance Marketing of Financial Services Directive. 
136 Distance Marketing of Financial Services Directive. 

106 

 
                                                           
Digital onboarding 

Financial literacy 

Financial service  

Fintech 

The process by which a prospective consumer, without physically meeting 
the  supplier  and  in  a  totally  digitalised  manner,  is  on-boarded  by  the 
supplier and becomes a client of the said supplier. 

Capability  of  consumers  and  small  business  owners  to  understand  retail 
financial products with a view to making informed financial decisions.137 

Any service of a banking, credit, insurance, personal pension, investment 
or payment nature.138 

Technologically  enabled  financial  innovation  that  could  result  in  new 
business  models,  applications,  processes,  or  products  with  an  associated 
material  effect  on  financial  markets  and  institutions  and  the  provision  of 
financial services.139 

Full harmonisation (maximum 
harmonisation) 

In the case of full harmonisation Member States must implement the EU 
measures but may not enact or retain any rules which depart from them.140 

Implementation 

Incremental costs and benefits 

The  process  of  making  sure  that  the  provisions  of  EU  legislation  can  be 
fully  applied.  For  EU  Directives,  this  is  done  via  transposition  of  its 
requirements  into  national  law,  for  other  EU  interventions  such  as 
Regulations or Decisions other measures may be necessary (e.g. in the case 
of Regulations, aligning other legislation that is not directly touched upon 
but  affected  indirectly  by  the  Regulation  with  the  definitions  and 
requirement of the Regulation). Whilst EU legislation must be transposed 
correctly it must also be applied appropriately to deliver the desired policy 
objectives.141 

Costs and benefits that would occur if a particular course of action is taken, 
compared to those that would have been obtained if that course of action 
had not been taken.142 

Information asymmetries 

Situations in which some agent in a trade possesses information that other 
agents involved in the same trade do not.143 

Insurance 

Intermediary 

A contract, represented by a policy, in which an individual or entity receives 
financial  protection  or  reimbursement  against  losses  from  an  insurance 
company. 

A natural or legal person who is not acting as a supplier and who, in the 
course of his trade, business or profession: (a) presents or offers financial 
service  agreements  to  consumers;  (b)  assists  consumers  by  undertaking 
preparatory  work  in  respect  of  financial  service  agreements;  and/or  (c) 
concludes  financial  service  agreements  with  consumers  on  behalf  of  the 
supplier.144 

137  European  Commission.  (2007).  Survey  of  Financial  Literacy  Schemes 
http://ec.europa.eu/finance/finservicesretail/docs/capability/report_survey_en.pdf. 
138 Distance Marketing of Financial Services Directive. 
139 European Banking Authority, Glossary for financial innovation. 
140 European Parliamentary Research Service, 2015, Competence in private law - The Treaty framework for a European 
private law and challenges for coherence. 
141 European Commission (2017), Better Regulation Guidelines, Glossary. 
142 https://financial-dictionary.thefreedictionary.com/Incremental+costs+and+benefits 
143 https://siteresources.worldbank.org/DEC/Resources/84797-1114437274304/Asymmetric_Info_Sep2003.pdf 
144 Based on the definition of intermediary in the Consumer Credit Directive. The main difference is that in this case the 
intermediary does not have to receive a fee. 

the  EU27.  Available  at: 

in 

107 

 
 
 
                                                           
Means of distance communication  Any  means  which,  without  the  simultaneous  physical  presence  of  the 
supplier  and  the  consumer,  may  be  used  for  the  distance  marketing  of  a 
service between those parties.145 

Mortgage loan 

Mystery shopping 

Non-banks 

Consumer real estate credit, usually extended on a long-term basis with the 
mortgaged property as security.146 

The activity of pretending to be a normal customer when you are employed 
by a company to check how its products or services are being sold.147 

In  general, 
these  are  non-monetary  financial  corporations.  More 
specifically,  they  include  insurance  corporations  and  pension  funds, 
financial auxiliaries, and other financial intermediaries.148 

Non-credit institution 

Any creditor that is not a credit institution.149 

Peer-to-peer lending (or P2P 
lending) 

Payday loan 

Payment accounts 

Payment services 

Personal loan 

Personal pension product 

A consumer credit service that allows businesses and individuals to borrow 
money, from many individuals who are ready to lend, instead of borrowing 
it from a single source. Peer-to-peer platforms used for P2P lending set out 
the  rates  and  terms  of  transactions  and  enable  the  completion  of  these 
transactions.150 

A small amount and short-term (up to one year) personal loan.151 

Means an account held in the name of one or more consumers which is used 
for the execution of payment transactions.152 

services enabling cash to be placed on a payment account as well as all the 
operations required for operating a payment account; services enabling cash 
withdrawals from a payment account as well as all the operations required 
for operating a payment account; execution of payment transactions; issuing 
of payment instruments and/or acquiring of payment transactions; money 
information 
remittance;  payment 
services.153 

initiation  services;  and  account 

Credit granted to a private person for non-commercial purposes solely on 
the  basis  of  that  person's  creditworthiness,  income,  and  financial 
circumstances.154 

A product which: (a) is based on a contract between an individual saver and 
an  entity  on  a  voluntary  basis  and  is  complementary  to  any  statutory  or 
occupational  pension  product;  (b)  provides  for 
long-term  capital 
accumulation with the explicit objective of providing income on retirement 
and with limited possibilities for early withdrawal before that time; (c) is 
neither a statutory nor an occupational pension product.155 

145 Distance Marketing of Financial Services Directive. 
146 American State Bank, Banking Glossary. 
147 Cambridge Business English Dictionary, 2011. 
148 European Central Bank, 2016, Bank lending survey for the euro area, Glossary. 
149 Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for 
consumers relating to residential immovable property. 
150 https://www.investopedia.com/terms/p/peer-to-peer-lending.asp 
151 European Credit Research Institute (ECRI), 2019, Price rules in consumer credit: should the EU act? 
152 Payment Accounts Directive. 
153 Payment Services Directive.  
154 Dictionary of Banking, UBS 1998 – 2019. 
155 Pan-European Personal Pension Product Regulation. 

108 

 
 
                                                           
Product bundling or Bundling 
practice 

The  offering or the selling of a  credit agreement in a package  with other 
distinct  financial  products  or  services  where  the  credit  agreement  is  also 
made available to the consumer separately but not necessarily on the same 
terms or conditions as when offered bundled with the ancillary services.156 

Right of withdrawal 

Consumer's right to terminate a contract without reason within a specified 
time period, provided certain conditions are fulfilled.157 

Robo-advice 

Savings accounts 

SECCI (Standard European 
Consumer Credit Information) 

The provision of advice through digital platforms that provide automated, 
algorithmic investment services with minimal human supervision 

Is  an  interest-bearing  deposit account  held  at  a  bank  or  another  financial 
institution which provides a small interest rate. The financial providers may 
limit  the  number  of  withdrawals  that  consumers  can  make  from  their 
savings  account  each  month.158  Savings  accounts  provide  instant  (“sight 
deposits”) or time-limited (“time deposits”) access to funds.159 

A  standardised form designed to show exactly  what a  finance agreement 
contains. The form will include key details such as type of credit, Annual 
Percentage  Rate  (APR),  number  and  frequency  of  payments,  and  total 
amount owed.160 

Stakeholder 

Any  individual  citizen  or  an  entity  impacted,  addressed,  or  otherwise 
concerned by an EU intervention.161 

Stakeholder consultation 

Sweeps 

Trading platform 

A  formal  process  of  collecting  input  and  views  from  citizens  and 
stakeholders  on  new  initiatives  or  evaluations/  fitness  checks,  based  on 
specific  questions  and/or  consultation  background  documents  or 
Commission documents launching a consultation process or Green Papers. 
When consulting, the Commission proactively seeks evidence (facts, views, 
opinions) on a specific issue.162 

A set of checks carried out on websites simultaneously to identify breaches 
of EU consumer law in a particular sector. The sweeps operate in in a two-
step  action  process,  comprising  of  (a)  screening  websites  to  identify 
breaches of consumer law in a given online market, and (b) enforcement in 
which national authorities ask traders to take corrective actions. Sweeps are 
coordinated by the European Commission and carried out simultaneously 
by national enforcement authorities in participating countries. 163 

The software that enables investors and traders to place trades and monitor 
accounts  through  financial  intermediaries.  Oftentimes,  trading  platforms 
will come bundled with other features, such as real-time quotes, charting 
tools, news feeds, and even premium research. 164 

156 Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for 
consumers relating to residential immovable property. 
157  IATE  EU  terminology  database,  COM-Terminology  Coordination,  based  on:  European  Commission  >  Rights  & 
principles applicable when you buy goods or services online. 
158 Investopedia. Savings account. Available at: https://www.investopedia.com/terms/s/savingsaccount.asp. 
159 European Commission (2006). Current accounts and related services. Available at: 
http://ec.europa.eu/competition/sectors/financial_services/inquiries/interim_report_2.pdf. 
160 Credit Plus, 2019, Glossary, available at https://www.creditplus.co.uk/car-finance-glossary/secci/. 
161 European Commission (2017), Better Regulation Guidelines, Glossary. 
162 European Commission (2017), Better Regulation Guidelines, Glossary. 
163 https://ec.europa.eu/info/live-work-travel-eu/consumers/enforcement-consumer-protection/sweeps_en. 
164 https://www.investopedia.com/terms/t/trading-platform.asp 

109 

 
                                                           
Transposition 

Virtual currencies 

Describes the process of incorporating the rights and obligations set out in 
an EU Directive into national legislation, thereby giving legal force to the 
provisions of the Directive. The Commission may take action if a Member 
State  fails  to  transpose  EU  legislation  and/or  to  communicate  to  the 
Commission  what  measures  it  has  taken.  In  case  of  no  or  partial 
transposition, the Commission can open formal infringement proceedings 
and eventually refer the Member State to the European Court of Justice.165  

A type of unregulated, digital money which is issued and usually controlled 
by its developers and used and accepted among the members of a specific 
virtual community.166 Virtual currencies are digital representations of value 
are  not  issued  nor  guaranteed  by  a  central  bank  or  public  authority  and 
consequently they are not (conventional) fiat currency (FC). 

165 European Commission (2017), Better Regulation Guidelines, Glossary. 
166 ECB (2012): “Virtual Currency Schemes”. European Central Bank, Frank. 

110