The audit activity of the Office of Competition and Consumer Protection (UOKiK) in Poland highlighted problems related to launch, misleading advertising, consumer complaints and adherence to compliance procedures. Extensive communication channels create new threats for advertisers and sellers who must be prepared to counteract these threats.
Increase in the number of RegTech companies (Regulation & Technology)
Companies are increasing the requisition for technologies adapted to the existing regulations in order to use them in order to gain a competitive advantage. The introduction of effective financial regulation is crucial for FinTech’s innovation and future success in the financial services market. There are new ways to reform the regulation, as well as the use of special software for the compliance optimization function.
Companies providing and improving such software, for example for reporting to public authorities (in environmental protection, competition or consumer), and they are called Reg-Tech (Regulation & Technology). Regtech – is a fintech that focuses on the application of technology to adapt financial institutions to regulatory obligations and requirements. Regtech emphasizes innovation and uses the latest technologies. An innovative platform of this type, based on open and free software (Regulation & Compliance), is developed, for example, by the British Financial Conduct Authority (FCA).
The reasons for the new approach
Observance of regulations is becoming more and more complex, time-consuming and expensive for companies. The growth of ‘regulatory technologies’ (RegTech) allows companies that use this type of technology to respond more quickly and efficiently to changing legal regulations, copy existing large data sets to unlock new applications of these activities, while reducing compliance costs regulations. The most important difference between standard solutions and RegTech solutions is simplicity. Data on financial transactions, customer interactions and security can be collected in large volumes and organized to gain knowledge about compliance teams, enabling them to evaluate compliance procedures and solve problems faster than ever before. RegTech’s companies will continue to innovate and find solutions in response to business needs thanks to such great opportunities.
Compliance system monitoring
Tracking consumer behawior on the internet will be necessary. Out of all consumer service channels – the one that provides personalized, hassle-free experience in many channels (including voice, chat and network) and devices – is and will continue to be a key element of customer service and a means to stop it. Companies with a strong multi-channel strategy are able to retain many more customers than companies with a weak strategy. In the next few years multichannel experience in customer service will become more and more important. To provide demanding customers with multi-channel experience, companies will need to monitor all channels in which customers will be involved to examine brand and regulatory compliance.
Consumer complaints will contribute to the increase in the number of proceedings UOKiK will continue its control activities and look at companies to which complaints will be brought by consumers. At the same time, the time at which companies respond to complaints submitted by consumers is significant. It is important for companies to take steps to amicably resolve disputes before consumers complain to UOKiK or before court proceedings take place. New regulations will contribute to increasing the work of compliance departments. Compliance specialists will have a lot of work in connection with the need to update compliance programs in order to adapt them to the changing legal regulations.
Pre-contractual information obligations of entrepreneurs play a large role. Regardless of the change in legal regulations, it can be noticed that the legislator is more and more involved in consumer protection. Compliance culture will spread from the Board to lower levels. More companies will change their policy to strengthen the culture of compliance to protect the reputation of their brand. Compliance culture will strengthen in reputable companies because they do not want to repeat what the Dodd-Frank Act has brought. This act, being a reaction to the financial crisis, was aimed at to prevent a repetition of the 2008 financial disaster in the future. It introduced stricter rules for regulating the activities of financial institutions and limiting profits. The risk of losing brand reputation due to non-compliance with the rules of monitoring and compliance with compliance rules is higher than ever. UOKiK looks at the actions of companies that may lead to fraud or abuse against consumers.
Companies, especially those operating on an international scale, should build a strong compliance culture – otherwise they must face legal and financial sanctions. Potential compliance violations lurk in the network. Credit cards, credit monitoring and loan companies have the largest percentage of URL addresses on the market with potential violations of compliance principles and marketing principles. Potential problems are misleading passwords or abuse in the scope of information provided. Companies bear responsibility not only for their own content, but also for content provided by their suppliers, as well as other external service providers. The legislator is to ensure that the activities of companies are compatible, among others with financial regulations regarding consumer protection.
The most important is consumer
Consumer protection is about treating consumers fairly and protecting their interests against actions that violate their rights. In an area such as the protection of consumers of financial services, the vast majority of violations involve a certain type of fraud. Enterprises should keep this in mind when creating and developing their compliance program, and remember that maintaining it will always be cheaper than sanctions, financial penalties, loss of reputation or changes in governing bodies.
Due to the progressing digitization, new challenges in the field of data protection and ensuring information security also appeared. The new regulations impose many new obligations that require a lot of organizational effort from entrepreneurs. Violations of the provisions of the regulation are subject to an administrative penalty payment of up to EUR 20,000,000, and in the case of an enterprise – up to 4% of its total annual global turnover from the previous financial year, with a higher amount in certain cases.
Changes in the field of e-privacy
The European Union has expanded the catalog of changes and decided to amend the rules on direct marketing, cookies and other forms of online monitoring. The amendment is necessary, for example, because such giants as Skype, Gmail, WhatsApp are not covered by EU regulations. The new Regulation is meant to change this.
The new regulations should be adapted to the Regulation on the Protection of Personal Data. The new regulation will have extraterritorial scope and will relate to the provision and use of electronic communications services in the EU, irrespective of whether data processing takes place within the EU. The provisions of the regulation will have wider application than currently. In addition to voice, text and e-mail services, the regulations will cover, for example, VoIP operators, instant messengers, messages on social media, provided that the information or metadata transmitted will contain personal data. This will force a new broad definition of “electronic communication service”, which will be understood as all services related to electronic communication.
Summing up, building a compliance program means also creating opportunities and competitive advantage through the use of the latest technologies, eliminating the risks associated with providing services to consumers. The emerging trends will also increase innovation in the area of compliance.