Financial services have a very significant impact on consumers' lives. It is therefore important that consumers make well-informed decisions and feel confident that they are adequately protected if something goes wrong.
The Directorate General for Health and Consumers is committed to ensuring a high degree of consumer protection as an essential feature of a smoothly-functioning EU market for financial services. Its work focuses on consumer credit, the distance marketing of financial services, and ensuring that consumer interests are considered in other EU financial legislation.
Consumers' experience when switching bank accounts
The Commission's enquiry on retail banking (2007) found customers faced significant barriers when moving their accounts from one bank to another. Upon the Commission's request, the European Banking Industry Committee adopted Common Principles on bank account switching to make that easier for consumers.
See the results of our mystery shopping exercise which examined how effective this initiative was for consumers.
Bank fee transparency and comparability in current bank accounts in EU countries
DG Health & Consumers carried out a study in order to make an EU inventory of initiatives in bank fee transparency and comparability of personal current accounts. The study found various initiatives on transparency and the comparability of current account fees across the EU 27 plus Norway.
Retail Financial Services Report - Bank fees, pre-contractual information, advice and switching
The Consumer Markets Scoreboard is the main market monitoring instrument for the consumer policy area. After the publication of the first Consumer Markets Scoreboard early in 2008, which identified retail financial services as a sector in need of monitoring, the Commission selected three areas where consumers are faced with a significant number of problems.
A new Commission Staff Working Document analyses the various retail financial services issues which were singled out for examination: pre-contractual information and the related issue of advice, the level and transparency of bank fees and bank account switching.
The bank fees section of the report is based on a study.
Information – the basis for good consumer decision-making
Financial services have become increasingly complex and difficult to understand. Consumers need clear and comprehensive information on competing financial products to make them easier to understand before consumers decide which one to buy. In order to learn more about the real needs of consumers in this area, the Commission launched a focus group study in all Member States in 2007. In each Member State, three groups, with roughly 10 consumers in each, discussed in depth their experiences relating to the information they received from banks and their expectations and preferences for future improvements in such information.
Read the report
This report has been produced by outside contractors for DG Health and Consumers and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's or the Health and Consumer Protection DG's views. The European Commission does not guarantee the accuracy of the data included in these surveys and studies, nor does it accept responsibility for any use made thereof.
Retail Investment Advice in the EU
In times of economic crisis, protecting investors by providing good quality investment advice is very important.
The Commission's mystery shopping study examined how investment advice, as regulated by the 'Markets in Finanical Instruments Directive' (MiFID), is delivered in practice across the EU.
Our mystery shoppers visited over 1200 investment advisors in the EU to see if they observed the MiFID requirements for advice. They also recorded situations where advisors recommended products not subject to MiFID, and explained, as far as possible, the reasons for unsuitable product recommendations.
Read the study.
Get more information on MiFID.
See the study on consumer decision-making in Retail Investment Services from a behavioural economics perspective.
These reports have been produced by outside contractors for DG Health and Consumers and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's or DG Health and Consumers' views. The Commission does not guarantee the accuracy of the data in these surveys and studies, nor does it accept responsibility for any use made thereof.
The Directive 2008/48/EC on credit agreements for consumers (the "Consumer Credit Directive") was adopted on 23 April 2008 and Member States had to transpose it into national law before 12 June 2010.
The Consumer Credit Directive aims at fostering the integration of the consumer credit market in the EU and ensuring a high level of consumer protection by focusing on transparency and consumer rights. It stipulates that a comprehensible set of information should be given to consumers in good time, before the contract is concluded and also as part of the credit agreement. In order to allow consumers to compare more easily the various offers and to better understand the information provided, creditors have to provide pre-contractual information in a standardised form (Standard European Consumer Credit Information). Moreover, they will also provide consumers with the Annual Percentage Rate of Charge (“APR”), which is a single figure, harmonised at EU level, representing the total cost of the credit. Directive 2011/90/EU has amended the assumptions for its calculation.
In addition, the Consumer Credit Directive grants two essential rights to consumers: they are allowed to withdraw from the credit agreement without giving any reason within a period of 14 days after the conclusion of the contract; and they have the possibility to repay their credit early at any time – in this case, the creditor can ask for a fair and objectively justified compensation.
Report on the implementation of the Consumer Credit Directive (May 2014)
The Commission is required to prepare every five years a report on the implementation of the Directive, and in particular assess the relevance of thresholds applied in the Directive and the percentages used for the compensation payable in the event of early repayment. The Commission has also the duty of monitoring the effects of existence of regulatory choices available to the Member States.
In this context, the Commission adopted on 14 may 2014 the Report on the implementation of the Directive
The main conclusion of the Report is that creditors should make further efforts to ensure that rights given to EU citizens by the Directive are respected. Amongst the rights demanding follow-up action are those regulating advertisements and pre-contractual information: creditors do not always inform consumers about their rights, such as the right to withdraw from the contract within 14 days and the right of early repayment.
However, some Member States were late in putting the legislation into practice and creditors had less time to adjust their business practices to the provisions of the Directive. At this stage the European Commission will focus on raising awareness among consumers and creditors of their rights and obligations and surveying their correct application and enforcement. This is in particular important for vulnerable consumers facing economic difficulties and using short term high interest loans.
The Report is based on the results of two studies carried out by external consultants:
Calculation of the Annual Percentage Rate ("APR")
Directive 2011/90/EU amends the assumptions for the calculation of the APR to reflect more accurately the products sold on the market.
A simulator based on these revised assumptions allows to calculate APR for pre-defined examples and also for the terms of the contract as defined by the user. It is in line with the European legislation as from 1 January 2013.
This Excel simulator have been produced by outside contractors for DG Health and Consumers and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's or the Health and Consumers DG's views. The European Commission does not guarantee the accuracy of the data included in the report and simulator, nor does it accept responsibility for any use made there.
To help Member States to correctly apply the Consumer Credit Directive, the Commission published on 8 May 2012 "Guidelines on the application of the Directive 2008/48/EC in relation to costs and the Annual Percentage Rate of charge". The Guidelines provide comprehensive explanations how to delineate the total cost of credit, in particular to be included in the calculation of APR, and how to apply assumptions as amended by the Directive 2011/90/EU.
In 2009 the Commission conducted a study examining the examples used to demonstrate the practical application of the APR in relation to consumer credit. See Terms of Reference.
The version of the Report below was made coherent with the changes in the assumptions for the calculation of the APR introduced by the Directive 2011/90/EU. It is also coherent with "Guidelines on the application of the Directive 2008/48/EC in relation to costs and the Annual Percentage Rate of charge".
In 2009 the Commission also provided a benchmarking report on the Directive 2008/48/EC. See Terms of Reference of this study. Read the report and Annex
These reports have been produced by outside contractors for DG Health and Consumers and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's or the Health and Consumers DG's views. The European Commission does not guarantee the accuracy of the data included in the report and simulator, nor does it accept responsibility for any use made thereof.
Distance Marketing of Financial Services
Unlike goods, when financial services are bought and sold over the internet or by telephone/fax, the 'financial service'
as such is a contract between a consumer and a bank, a credit card company, an investment fund, an insurance company, or another financial institution.
To boost consumer confidence in these distance marketing techniques - and in particular in internet transactions across borders - the EU has adopted in 2002 a
Directive laying down fundamental rights for consumers:
- An obligation to provide consumers with comprehensive information before a contract is concluded.
- A consumer right to withdraw from the contract during a cooling-off period.
- A ban on abusive marketing practices seeking to oblige consumers to buy a service they have not solicited ("inertia selling")
- Rules to restrict other practices such as unsolicited phone calls and e-mails ("coldcalling" and "spamming")
On 6 April 2006, the Commission adopted a communication
which informs the European Parliament and the Council on the state of
play regarding the review of the application of this Directive.
In line with Article 20(1) of this Directive, and following its implementation the Commission will examine, following the implementation of the Directive, how it impacts the distance selling of financial services within the internal market.
To this end the Commission launched two studies in 2007. The first study provides the legal input into the analysis of the Directive; the second one, the economic input.
These reports have been produced by outside contractors for DG Health and Consumers and represent their views on the matter. These views have not been adopted or in any way approved by the Commission and should not be relied upon as a statement of the Commission's or the Health and Consumer Protection DG's views. The European Commission does not guarantee the accuracy of the data included in these surveys and studies, nor does it accept responsibility for any use made thereof.
On 20 November 2009 the Commission adopted a Communication
, informing the European Parliament and the Council of the outcome of the review regarding the application of the Directive. This report also takes account of the results of the legal and economic studies.
In most Member States the market for distance selling of financial services has not changed significantly since the Directive was introduced. At this stage, there is no evidence that consumers face problems arising from incorrect implementation of the Directive. In some cases, where conformity of national rules with the Directive was not sufficient, the Commission launched formal infringement procedures.
While the Commission has decided not to amend the Directive at present, it intends to monitor the market to check if the increased use of e-commerce is mirrored in the distance financial services sector and to take appropriate action if this is not the case.
A mortgage credit is often the most important financial operation for an ordinary consumer. The Commission has therefore undertaken a number of initiatives aimed at ensuring that consumers make an informed choice.
In 2001 the Commission endorsed the guidelines on harmonised information on "home loans" (mortgage or housing credit) to be made available by lenders to consumers. The guidelines were agreed in the form of a Voluntary Code of Conduct between the EU mortgage-lending industry and consumer groups. Their aim is to make it easier for consumers to compare loan products available from different lenders, including lenders from other Member States and to allow consumers to make an informed choice.
the Code of Conduct
When signing up to the Code, mortgage lenders commit themselves to giving prospective borrowers two sets of information before they sign a contract:
- General information as to the different types of products offered including the types of interest rate (fixed, variable or combinations thereof) and all additional costs associated with taking up a mortgage credit.
- Personalized information for the specific product the consumer is interested in, indicating for example the exact amounts to be paid over the full time span of the loan, as well as any possibility and conditions for early repayment.
In 2005 the Commission published a Green Paper
on mortgage credit with the aim of exploring the need for possible future initiatives in this field.
In 2006 the Commission launched a Mortgage Dialogue
between the lending industry and consumers, with the aim of finding common solutions to some specific issues, such as, for example, pre-contractual information and advice.
For more information on home-loans, click here
Consumer Education in Financial Services
In recent years, financial education has grown in importance as a result of financial market developments, demographic and economic changes.
Nowadays, while individuals are taking more responsibility for their financial security, financial products are getting more complex and diverse.
Consumers are offered a variety of credit and savings instruments both at home and across borders, provided by a range of entities from on-line banks to other types
of credit institutions and brokers. This makes financial products harder to understand and to compare; it also increases the risk of buying an inappropriate product.
The Commission is promoting the financial education of consumers and is raising their level of awareness so that they are better equipped to make informed,
considered and rational choices in financial services.
In this context, the Commission has provided financial education through two main projects:
The European Consumer Diary - an educational tool for teachers and students covering topics
including financial services. Aimed at 15-18 year olds, Europa Diary helps European students to be better informed about their rights and opportunities. It is
available in all EU languages and distributed for free, together with a Teacher's guide to be used in classrooms.
Dolceta – a web-based consumer education tool with learning exercises and other interactive material
aimed at long-term education of adults. It consists of two different modules, including one on financial services. It offers different levels of learning depending on users'
previous knowledge. Due to its success to date, the Commission plans to expand this initiative to other modules covering teacher training in financial issues in order to encourage
and help teachers to incorporate financial education into everyday school life.
The Single Euro Payments Area (SEPA) is an initiative which comes from the European banking industry and involves the creation of a
Euro zone area where all electronic payments are considered domestic. This means the removal of the distinction between making electronic payments
within the same country and across the Euro area. It will make it easier for consumers to make electronic payments, such as credit and debit card
payments, bank transfers and direct debits. The legal framework for this initiative is provided by the
Payment Services Directive
The deadline for the completion of SEPA is 2010, but since January 2008 the SEPA credit transfer products are already available.
In general terms, SEPA should deliver substantial advantages to all the stakeholders concerned. Consumers will be able to use their bank
card everywhere and more competition is expected due to the flexibility of the new tools.
The Commission will monitor the impact of SEPA over time. To this aim, we have launched a study, which provides us with data on the current
prices of the means of payment and allows the comparison of the present data with those which will be collected in future studies.
"Preparing the monitoring of the impact of the Single Euro Payment Area (SEPA) on consumers"
For more information on SEPA, click here.
Other financial services initiatives
The Euro: the implications for consumers
Since 1 January 2002, consumers have been using euro notes and coins in certain Member States.
The introduction of the euro gives consumers many opportunities, including:
- Reducing the transaction costs of buying in a Member State other than the one the consumer lives in.
- Making it easier to compare prices in different countries and identify a good deal.
Consumers' interests have been protected by:
- Legislation that ensures continuity of contracts and methods of conversion
- Negotiated agreements covering consumer information on prices and means of conversion
- Continuous monitoring of market developments, particularly concerning price changes and the cost of international monetary transactions
More information on specific aspects of the introduction of the euro is available below:
Quantification of the economic impacts of EU action to improve fee transparency, comparability and mobility in the Internal Market for personal payment accounts.
The purpose of the study was to quantify the costs and benefits of a number of policy options aimed at improving the transparency and comparability of payment account fee information as well as switching of payment accounts.
Bank Accounts Behavioural Study
This study looks at consumers' behavioural responses to different forms of information about the price of a bank account. It seeks to understand how information can help consumers make more informed choices when opening and switching bank accounts.
Mapping of Non-Profit Entities in the EU Providing General Financial Advice to Consumers
Eurobarometer (special), August 2005: Public Opinion in Europe on Financial Services
Eurobarometer, January 2004: European Consumers and Financial Services
Eurobarometer (candidate countries), May 2004: European consumers and financial services: the 10 accession countries
Study, December 2004: An assessment of the extent of an identified need for simplified, standard financial services products
Qualitative study: Cross-border buyers of financial services, OPTEM, December 2003
Statistical study: Study of the problem of Consumer Indebtedness: statistical aspects, ORC Macro, October 2001