Circular Letter No. CC/2020/00000044: Good Practices for Marketing Banking Products and Services via Digital Channels

Circular Letter No. CC/2020/00000044
Sent to:
Credit Institutions; Financial Companies; E-Money Institutions and Payment Institutions.
Mod. 99999924/T – 01/14
Subject: Good practices to be observed in the marketing of banking products and services through digital channels

The Banco de Portugal has been monitoring the activities of credit institutions, financial companies, payment institutions and e-money institutions (hereinafter, "institutions") in the marketing of retail banking products and services through digital channels.

The Banco de Portugal is particularly attentive to the manner in which institutions ensure compliance with the applicable regulatory framework, notably when offering credit products to consumers through digital channels. As highlighted in the 2018 and 2019 Behavioral Supervision Reports and the Synopsis of Behavioral Supervision Activities of the 1st semester of 2019, institutions have been recommended to adopt measures aimed at ensuring compliance with information and assistance duties and to guarantee the security of the contracting processes for credit products for consumers.

The European Banking Authority ("EBA") has also been analyzing the marketing of retail banking products and services through digital channels, recently suggesting to national competent authorities that they consider incorporating into their respective legal and regulatory frameworks a set of recommendations aimed at increasing information transparency in digital channels. The recommendations aim to ensure that the contracting of products and services through these channels does not compromise compliance with duties, notably information duties, that institutions must observe under applicable laws and regulations. These recommendations were shared with the European Commission, as a contribution to the reflection being developed by the European legislator in the context of the revision of Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 on the distance marketing of consumer financial services (Opinion of the European Banking Authority on disclosure to consumers of banking services through digital means under Directive 2002/65/EC).

Considering its supervisory experience in the marketing of credit products to consumers and the recommendations issued by the EBA, the Banco de Portugal considers it appropriate to recommend a set of good practices applicable to the marketing of retail banking products and services (namely, bank deposits, credit products, payment services and e-money) through digital channels (online or mobile).

Mod. 99999924/T – 01/14
In exercise of the competence attributed to it by Article 17 of its Organic Law, approved by Law No. 5/98 of 31 January, the Banco de Portugal recommends that institutions adopt the following good practices:

I. General Recommendations

1. Without prejudice to the compliance with information duties established in applicable norms, institutions that market banking products or services through digital channels must ensure that the information provided through these channels regarding said products or services is adequate in terms of content, presentation format and prominence, notably taking into account the marketing platform and the devices that banking customers may use to acquire such products or services.

2. Institutions must use simple language, with short and direct sentences, and adopt, notably, keywords, lists of included services, if applicable, glossary of terms and references, explanatory notes (tooltips or other equivalent mechanism) or frequently asked questions to facilitate the understanding of information by banking customers.

3. Institutions must evaluate the use of graphic elements such as font size, color, icons and images on all information media, including on the marketing platform screens and in advertising, ensuring that said elements are not likely to affect the readability, comprehension and prominence of information regarding the banking product or service in question. For this purpose, institutions must, in particular, ensure that:
   (i) The font size used allows for adequate reading of the information provided; (ii) Banking customers have the possibility to change the default font size; (iii) Information on the fundamental characteristics of the banking product or service and on other relevant elements, such as commissions and expenses possibly applicable, is not presented with a font size smaller than that adopted for the rest of the information; (iv) The colors or images used do not hinder reading for banking customers (for example, information inscribed in a color that blends with the screen background) and do not divert their attention from information on the fundamental characteristics of the banking product or service or on other elements considered relevant, such as commissions and expenses possibly applicable; (v) The use of colors or images on mandatory information media does not restrict reading when printed in black and white.

4. In cases where hyperlinks are used, institutions must ensure, in particular, that:

Mod. 99999924/T – 01/14
(i) Information on the banking product or service is not fragmented; (ii) Hyperlinks are easily identifiable by banking customers, presented in a coherent manner (through the use, notably, of the same style, positioning and prominence) and in accordance with the nature and relevance of the information they convey; (iii) Hyperlinks direct banking customers directly to the page where the relevant information is located; (iv) Hyperlinks are tested periodically to ensure their functionality and to assess their effectiveness, notably through monitoring the number of clicks and the behavior of banking customers.

5. In cases where a brand is used for the marketing of a banking product or service, institutions must ensure that any reference to said brand on all information media, including on the marketing platform screens and in advertising, is accompanied by the identification, with similar prominence, of the institution responsible for the product or service.

II. Specific Recommendations

A. General Pre-contractual Phase

6. Institutions, within the scope of providing pre-contractual information, must ensure that the charges resulting from the banking product or service for customers are presented with similar prominence to that conferred on their benefits, notably regarding the font size and color used.

7. Institutions must present, prominently, information on the fundamental characteristics of the banking product or service and on other elements considered relevant, such as commissions and expenses possibly applicable, on the main screen or page of the marketing platform, through the use of larger characters, information boxes, popups, simulations, summaries or other similar means.

8. Institutions must describe, on the main screen or page of the marketing platform, the steps of the process and the elements necessary for contracting, so that it is evident, from the first moment, for banking customers (i) the various phases of the contracting process, (ii) the possible need to use other channels, devices or means of communication during the contracting process, and (iii) the possible documentary elements necessary for the contracting of the banking product or service.

9. Institutions must ensure that general information regarding the banking product or service is easily accessible and can be downloaded by banking customers (notably, the Standardized Information Sheet, if applicable).

10. Institutions must provide a dedicated, easily accessible and permanent space on the marketing platform, website or institutional application, which informs banking customers about the means available to them for submitting complaints and for recourse to alternative dispute resolution procedures, identifying the alternative dispute resolution entities to which they adhere and placing a hyperlink to their respective websites.

11. When several institutions are involved in the marketing of a retail banking product or service, banking customers must be duly informed about the scope of intervention of each of these institutions, so that they can identify which one is specifically responsible for the action in question, with a view to submitting a complaint or recourse to alternative dispute resolution procedures.

B. Personalized Pre-contractual Phase

12. During the credit contracting process, institutions must refrain from using expressions that indicate approval of the contractual proposal before it has occurred, such as "pre-approval", "pre-acceptance" or "pre-assessment".

13. Institutions must not present to banking customers options selected by default or use graphic elements, such as font size, color, icons and images, that induce the customer to choose a specific option (notably, within the scope of the bundled sale of optional products and services or the financing of initial charges associated with the contract).

14. Institutions must present and frame information regarding the banking product or service they are marketing separately from information regarding another accessory product or service (notably, an insurance contract).

15. Institutions must ensure that the contracting process only advances to the next phase after the banking customer has navigated through all pages of the mandatory information documents (notably, Standardized Information Sheet, Depositor Information Sheet and draft contract), through mandatory scrolling, and has confirmed their reading at the end of the documents. Institutions must use visual or textual techniques to encourage banking customers to read the documents to the end, notably by adjusting the viewing format, for example, through different sections or windows.

16. Institutions must provide assistance to banking customers regarding the banking product or service in question (notably, regarding its characteristics, risks and commissions and expenses possibly applicable) and the contracting process (notably, phases of the process and

Mod. 99999924/T – 01/14 documentation necessary), through the provision, among others, of a customer service line or live chat, chatbot, frequently asked questions, infographic, explanatory video or other interactive tools that prove adequate to the complexity of the banking product or service, the information being provided and the contracting process.

17. In situations where the marketing of a credit product is involved and where the assessment of the solvency of banking customers is carried out using exclusively automated decision-making processes, notably based on artificial intelligence models, institutions must inform the banking customer of this fact, with a view to allowing them to exercise the rights provided for in Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016.

18. In situations where the marketing of a credit product is involved and where the credit application has been rejected based on information contained in credit liability databases or the public list of executions, institutions must use the same channel that was used for the marketing of the credit product or use another electronic means of communication (notably, email) to, in accordance with the law, transmit this fact to the banking customer.

C. Contract Conclusion Phase

19. Institutions must adopt robust methods to confirm the will to contract of banking customers, such as, for example, qualified electronic signature, mobile digital key or, at least, two elements, different from each other, belonging to the categories of knowledge, possession and inherence.

20. Institutions must inform banking customers in advance about the available methods for confirming the will to contract.

D. Contract Duration Phase

21. Institutions must provide a dedicated and easily accessible space so that banking customers who contracted the banking product or service through digital channels can, under the terms of the law, exercise the right of free revocation on the marketing platform of the banking product or service, on the website or on the application associated with the management of the contractual relationship underlying the contract in question. The exercise of the right of free revocation must be as convenient as the form of contract conclusion.

22. Institutions must provide a dedicated, easily accessible and permanent space so that banking customers who contracted a credit product through digital channels can, under the terms of the law, exercise the right of early repayment on the marketing platform of the product, on the website or on the application associated with the management of the contractual relationship underlying the contract in question. The exercise of the right of early repayment, partial or total, must be as convenient as the form of contract conclusion.

23. Institutions, with the prior consent of the banking customer, must use instant communication channels, such as email, short message service (SMS) or push notifications, when they consider it appropriate to alert the banking customer to the availability, in their private area, of communications subsequent to the contracting of a banking product or service (notably, the alteration of contractual conditions regarding commissions and expenses possibly applicable).

---