Directive 2002/65/EC defines financial services as "any service of a banking, credit, insurance, personal pension, investment or payment nature".
Examples of unfair commercial practices in the financial sector
Financial services fall within the scope of the Directive and are subject to its provisions, including Annex I (the "black list"). As mentioned in Recital 10, the Directive "provides protection for consumers where there is no specific sectoral legislation at Community level and prohibits traders from creating a false impression of the nature of products. This is particularly important for complex products with high levels of risk to consumers, such as certain financial services products".
National authorities have already applied the provisions of the Directive in this field. Thus, the Greek and Belgian authorities have already taken legal action against certain banks for providing misleading information on the risks inherent in certain financial products, namely Lehman Brothers' bonds.
When determining whether such practices were misleading, the Greek authorities took into account the fact that the consumers targeted by the banks for the sale of these bonds were ordinary current account holders rather than professional investors familiar with these types of financial products.
The Commission Staff Working Paper on Retail Financial Services of 22 September 2009 identified other problematic commercial practices occurring in the financial sector, e.g.:
- non-transparent bank fees which make it almost impossible for consumers to systematically compare all the offers presented in the market;
- insufficient and unintelligible pre-contractual information (complex language, important information hidden in small print, long pages of information provided only shortly before the signature of the contract). As a consequence, consumers are not adequately informed about the features (e.g. the interest rate, the expected return and the costs involved) of the financial product;
- for current bank accounts, possible obstacles to switching.
Under the Directive, such practices could be considered misleading: information to consumers should not be false or deceptive particularly with regards to the benefits, expected results and the risks contained in a financial product or service. Further, the presentation and calculation of fees and charges should be clear (e.g. in relation to overdraft charges). Under the Directive, information, even if factually correct, should not be presented in a deceptive manner. Finally, the Directive sets out criteria to assess aggressive practices, including using onerous or disproportionate non-contractual barriers where consumers wish to terminate the contract or to switch to another trader. Obstacles to switching may therefore be considered aggressive practices.
With regard to payment services (defined as services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account), consumers are also protected against unintelligible information under the Payment Services Directive which provides that "the information and conditions shall be given in easily understandable words and in a clear and comprehensible form, in an official language of the Member State where the payment service is offered or in any other language agreed between the parties" (Article 41).
The Commission services will collaborate with national authorities on the Directive's enforcement in the financial sector and may supplement the guidance in light of the additional cases and examples collected.
The minimum harmonisation clause
Article 3(9) specifies that Member States are allowed to regulate in a more prescriptive manner unfair commercial practices occurring in this sector - meaning that the Directive does not fully harmonise national rules regulating unfair commercial practices in the field of financial services. Recital 9 further explains that "financial services and immovable property, by reason of their complexity and inherent serious risks, necessitate detailed requirements, including positive obligations on traders. For this reason, in the field of financial services and immovable property, this Directive is without prejudice to the right of Member States to go beyond its provisions to protect the economic interests of consumers".
- Member States can retain national rules prohibiting combined offers of financial services as long as these rules otherwise comply with EU law;
- Member States can retain more detailed information requirements for financial products or standard used forms.
The relationship with specific Directives
Where other directives provide for more specific rules for commercial practices in the financial sector, the Directive complements this existing legislation.
For example, the Consumer Credit Directive contains specific provisions on advertising concerning credit agreements (such advertising shall specify for example the borrowing rate, the total amount of credit, the annual percentage rate of charge and if applicable the duration of the credit agreement) as well as a list of standardised pre-contractual information to be provided to consumers to enable them, in particular, to compare different offers. The UCP Directive complements these specific requirements. It will come into play if, for example, the information is advertised in a misleading way or if the service provider uses aggressive commercial practices.
The Payment Services Directive (Directive 2007/64/EC) contains pre-contractual information requirements in the field of payment services offered to consumers (Articles 37-39, 42) as well as requirements on how this information should be conveyed (Articles 36 and 41). The area where the Directive and the Payment Services Directive overlap is limited since the scope of the Payment Service Directive is circumscribed to payment services (whereas the Directive applies to a broader array of business-to-consumers (B2C) financial services). In this limited area, the Payment Services Directive contains more specific provisions on pre-contractual information to be provided to consumers in cases of an invitation to purchase and on the modalities for delivering pre-contractual information and is therefore lex specialis to the Directive. Outside this area, the Directive continues to apply and is therefore complementary to the Payment Services Directive (cf. Recital 22 of the Payment Services Directive). The Directive is applicable, for example, when it comes to advertising of payment services or aggressive selling of payment services.