The effects of POPI on direct marketing
One of the laws which will have the most significant impact on the local financial services industry, and the general public as a whole, is the Protection of Private Information (POPI) Act.
We have profiled the effects that this Act will have on the insurance industry in a direct manner, how companies collect and manage private information, but what will its indirect effects be? How easily will companies be able to sell other products or services which don't form part of the original purchase?
Direct marketing worries
Legal firm Camargue reports that the Act is expected to have far-reaching consequences for the direct marketing industry in South Africa. The POPI Act will impose strict laws on how a company collects, administers and stores information. No information may be given from one division of a company to another division of a company for direct marketing purposes. Strict fines and shutting down companies may be the result of non-compliance with the Acts' directives.
"The implications of the Act for the direct marketing industry are considerable as it effectively outlaws the transmission of direct marketing messages prior to receiving express consent from the recipient,” says Catherine Berry, Senior Underwriter: Financial and Professional Lines at Camargue.
She adds that the Act will be enforced by serious penalties such as heavy fines and even jail time.
But what exactly will be covered by the Act? There are many forms of direct marketing which includes sms', phone calls and e-mails.
Berry says that while the new legislation applies to any form of electronic communication, such as SMS and e-mails, which involve automation storage and forwarding, it is not applicable to person-to-person telephone calls.
Gathering intelligence
The biggest mystery to clients remains how direct marketers or direct marketing departments of a firm get your information.
The Direct Marketing Association of South Africa's Alastair Tempest explains that these include customer databases, shared information from companies in non-competing fields, or information from companies who are simply willing to share their data. He adds that sometimes list brokers are subsidiaries of large companies with extensive databases that they rent to marketers, and in some cases these lists are then combined for analysis and segmentation in order to provide a good profile of the individual.
Giving consent
What is important to note is that the person who gets personal information from you has to do so in a responsible manner and they cannot freely distribute your information without your consent.
Perhaps one of the most critical aspects of the legislation to consider, is its definition of consent from the consumer which refers to either an individual who has opted-in or one that is an existing client of the direct marketer.
"This is significant because both the Electronic Communications (ECT) Act and the Consumer Protection Act (CPA) allow the opt-out option to be used for direct marketing purposes but when it comes to the POPI Act, consumers actually have to confirm that they want to participate,” explains Berry.
However, there are exceptions to the rule:
- Direct marketers can make contact with consumers when they have obtained their contact details from a previous sale.
- Direct marketers can make contact when they are marketing a similar product or service to ones previously purchased.
- Direct marketers can make contact when the client has previously been given the opportunity to opt out of a similar communication and has not made use of this opportunity.
According to Pieter Streicher, Managing Director of Bulksms.com, until free opt-out from direct SMS marketing is made possible, it is still technically illegal to use unsolicited and solicited direct marketing over SMS. This is because the CPA says that marketers may not charge consumers to opt out or register pre-emptive blocks.
Berry highlights the practice of procuring information from third-party data sources as another area of complication for direct marketers. "Not only would marketers have to gain the consent of the regulator, but the third party also needs to gain consent from the clients who have provided them with the information before they are able to proceed,” she warns.
Editor's Thoughts:
While this Act is long overdue, the implementation and oversight on the compliance will prove to be a major challenge to implement. It will also be a major challenge for consumers to prove that they did in fact indicate that they want to opt out of direct marketing activities. Will we see increased protection or will we see all of the e mailed and sms direct marketing campaigns moving towards phonecalls? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
