EU proposes updates to product safety and consumer credit rules

2 July 2021

This week, the European Commission presented its legislative proposals for the revisions of the General Product Safety Directive and of the Directive on consumer credits. According to the Commission, the updates will be vital in “enhancing consumer rights in a world reshaped by digitalisation and the COVID-19 pandemic.” 

Since its inception in 2001, the General Product Safety Directive has become the EU’s key instrument of ensuring the safety of consumer products being placed on the internal market. 

Under the Directive, which complements other sector-specific legislation such as the toy safety, machinery or cosmetics, in areas where there is no product specific legislation, businesses can only sell products which are considered safe. They also have an obligation to inform consumers of any risks associated with the products they supply. An example of this information is the commonly seen warning to store small or chemical items away from children. In addition, the General Product Safety Directive obliges businesses to ensure any dangerous products present on the market can be traced so they can be removed to avoid any risks to consumers. 

The Commission’s now proposed revision aims to make the regulatory framework fit for the e-commerce age, by extending its remit to online marketplaces such as Amazon, eBay, Zalando or Alibaba. Following numerous revelations about lax data protection or cybersecurity provisions in many consumer products, the Commission has also brought these aspects into the Directive’s scope. 

Under the proposed rules online marketplaces would be required to remove flagged dangerous products within two working days or face penalties from national regulators. According to Commission guidance, such penalties could amount to maximum fines of at least 4% of the company’s annual turnover in the relevant EU country if they fail to comply. 

Meanwhile, according to Commission Vice-President for Values and Transparency, Věra Jourová, and Commissioner for Justice, Didier Reynders, the revision of the Consumer Credit Directiveensures that information related to consumer credits must be presented in a clear and understandable way, and must be adapted to digital devices. With this, the Commission is responding to increased calls for regulatory action in response to the growing popularity of so-called “buy now, pay later” payment models in recent years. 

Consumer groups had repeatedly complained that the information provided to consumers was insufficient, leading them to sign up to services that would eventually end up costing more. 

The proposed revisions aim to extend the scope of financial products to comply with lending obligations, including small loans offered through buy now, pay later models. It also proposes a limit on consumer loan costs, with national regulators foreseen to cap interest rates.

Following this week’s presentation of the proposals, both the European Parliament and the Council are expected to begin their work on the files after the summer recess.