Last week, on 23 March 2017, the Commission published its Action Plan on Consumer Financial Services. It follows a consultation closed in March 2016 on its Green Paper on Retail Financial Services. The EU wants to build on its legislative initiatives (Payment Accounts Directive, Mortgage Credit Directive, Insurance Distribution Directive) and other action plans and strategies (CMU, Single Market Strategy, Digital Single Market Strategy). The Action Plan sets out a roadmap for further work. Many of the actions will need to involve stakeholders such as national supervisory authorities, service providers and consumer organisations. After strengthening prudential requirements for Europe’s banking sector and introducing new transparency rules for trading etc.., the Commission is now turning to its retail financial services agenda where integration as well as high consumer protection standards must be equally prioritised. Most proposals are for non-legislative measures.
The Action Plan identifies three main strands of further work:
- Increase consumer trust and empower consumers (no-claims bonus for drivers, reduced fees for Non-Euro cross-border transactions, and more transparent pricing of car rental insurance).
- Reduce legal and regulatory obstacles affecting businesses (working on common creditworthiness assessment criteria and facilitating the exchange of data between credit registers).
- Support the development of an innovative digital world (which can overcome some of the existing barriers to the Single Market e.g. electronic identification and trust services for checking the identity of customers, monitoring the practices of digital providers).
Among the most interesting areas are the following:
- Consumer credit: Deeper Single Market for consumer credit: Examine Non-bank players (online payday loans, p2p) and whether current CCD rules need to be reviewed or whether further steps are needed to ensure that consumers are being adequately protected while benefitting from a greater variety of loans. Also work harmonising credit databases for better creditworthiness assessments (e.g. introduce common creditworthiness assessment standards and principles for lending and assess alternative data uses)
- Switching products/providers and comparison websites: Extension of PAD to other areas outside bank accounts. Investigate switching barriers; Trust in standards for PCWs.
- Consumer protection rules and online selling of financial services: Pressure to remove certain national rules. Planned study to monitor disclosure requirements online and by digital providers (pre-contractual disclosure requirements might not be fit for the digital world and need to be adjusted e.g. for mobile phone use etc..) – update of the distance selling directive which iff investigated in 2009. Also related is work on Digital identity checks (a study on the cross-border use of electronic identification and know-your-customer portability)
- Promoting FinTech: Launched a Consultation on FinTech. Open til June 15, 2017. Based on this public consultation and the work of the FinTech Task Force, the Commission will present an EU strategy for FinTech,
Consumer Financial Services Action Plan: Main initiatives (only two legislative actions have been initially proposed).
The two legislative actions:
Lower charges on non-euro transactions: Extension of reduced charges to all EU currencies (by Q4 2017)
Motor insurance: Complete the REFIT review and improve the cross-border recognition of claims history statements to ensure that no-claims bonuses in motor insurance will be accepted more easily and widely across borders (Q4 2017).
Key consumer protection Areas: (non-legislative proposals)
Deeper Single Market for consumer credit: Explore ways of facilitating access to loans across borders whilst ensuring a high level of consumer protection. Also consider ways of addressing in a more efficient manner consumer over-indebtedness linked to credit activities (H1 2018)
Better creditworthiness assessments: Introduce common creditworthiness assessment standards and principles for lending to consumers and develop a minimum set of data to be exchanged between credit registers in cross-border creditworthiness assessment (H2 2018)
Easier product switching: Explore how to encourage the switching of retail financial services, building on what has already been achieved through the Payment Accounts Directive and the Multi-stakeholder dialogue on comparison tools (H2 2018)
Fair consumer protection rules: Examine national consumer protection and conduct rules to assess whether they create unjustified barriers to crossborder business (H2 2018)
Online selling of financial services: Monitor the distance selling market to identify the potential consumer risks and business opportunities in this market and decide on the need to amend distance selling (including disclosure) requirements (H1 2018)
Quality price comparison websites: Work with stakeholders to enhance the quality and reliability of financial services comparison websites, by promoting the uptake of existing principles and through voluntary certification schemes. (H1 2018)
Other areas: (non legislative proposals)
Promoting FinTech: Determine which actions are required to support the development of FinTech and a technology-driven Single Market for financial services (Q4 2017)
Digital identity checks: Study on the cross-border use of electronic identification and know-your-customer portability based on eIDAS. This will be accompanied by an implementation plan to create an E-Banking building block (Q4 2017)
Transparency in currency conversion: Review of good and bad practices in dynamic currency conversion and consider the most appropriate means to allow consumers to choose the best rate (H1 2018)
Transparent pricing in car rentals: Monitor the implementation of the agreement with major car rental firms on transparent pricing of insurance-related elements, consider whether further action is needed to extend transparent practices to the entire market (Q4 2017).
The Action Plan does not address all the details for a consumer-friendly single market in financial services that were featured in the European Parliament report, such as simpler, more transparent and more standardised products and the need for better, more independent advice for consumers: Its calls were to: 1) develop simple, portable and safe financial products as well as setting default product options; 2) ensure that digitalisation of retail finance does not lead to financial exclusion; 3) end unjustified geo-blocking in retail financial services; 4) more powers for consumer protection and funding to be given to the European financial supervisors for pensions & insurance (EIOPA), banking (EBA) and securities and markets (ESMA); 5) ensure out-of-court dispute resolution bodies are truly independent and adhered by all financial firms. See previous post from 2016: http://www.responsible-credit.net/index.php?id=1980&viewid=49062