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Polish Association of Loan Companies

Question 1: Are the issues identified by the EBA and the way forward proposed in section 4.1 relevant and complete? If not, please explain why.
Yes, we find them relevant and complete at the date of Discussion Paper's publication. We find it advisable to consider specific measures for a constant and on-going monitoring of risks associated with illegal acquisition of personal data, breaking rules of privacy and unauthorized disclosure of confidential financial and business data. These specific risks can evolve parallely to coming technological innovations.
Question 2: Are the issues identified by the EBA and the way forward proposed in subsection 4.2.1 relevant and complete? If not, please explain why.
Yes, we find them relevant and complete, though we cannot agree to perceive the activitiy of Fintech as a danger to traditional credit institutions in terms of their stakeholders' interest (Section 76 on page 36). Acceptance of such a view would justify possible unnecessary legislative initiatives being disruptive to the further development of FinTech branch in the name of politically promising mottos such as supporting traditional banks to ensure "stability".
Question 3: What opportunities and threats arising from FinTech do you foresee for credit institutions?
There are different threats depandable of what credit institution is taken into consideration. First of all, in Poland we note strong and ever increasing competition on the market between traditional banks offering consumer loans and modern, technologically advanced lending institutions. The banks' offer is usually less convenient for consumers due to excessive formalities, standard 'paper" procedures and inaccessibility for consumers with mediocre credit history. On the other hand, those formalities that speak for protection of finances entrusted to the bank may be justified when it comes to keeping and protecting bank accounts and clients' cash. The lending institutions do not use consumers' money for their operations and do not require such tight procedures as the banks do, except those aimed at data protection and IT systems security. As a summary, the main threat for traditional banks on the consumer credit market is the increasing competition by modern lending institutions. The latter are threatened by the risk of excessive legislation to be pursued in the name of wrongly understood "clients' security".
Question 4: Are the issues identified by the EBA and the way forward proposed in subsection 4.2.2 relevant and complete? If not, please explain why.
Yes, we find all the arguments reasonable.
Question 5: What opportunities and threats arising from FinTech do you foresee for payment institutions and electronic money institutions?
The PZIP does not include firms offering payment and electronic money services. Nevertheless, the main threat that we can identify in this area are data protection and prevention of identity theft.
Question 6: Are the issues identified by the EBA and the way forward proposed in subsection 4.3.1 relevant and complete? If not, please explain why.
Yes, they are relevant but in our opinion not complete. In particular, the conclusion in Section 94 finds our full support. The drive from traditional banking to FinTech banking is in fact a move from 'bank-centered economy" to consumer-oriented modern, flexible and adjustable financial services. Therefore, we find it very important to broaden the spectrum of EBA's interest devoted to incumbant credit institutions (traditional banks) by consideration of legislative impact onto development of modern lending institutions and other FinTech businesses and start-ups. The financial stability of traditional banks in our opinion should not be the focus (Sections 101-103).
Question 7: What are your views on the impact that the use of technology-enabled financial innovation and/or the growth in the number of FinTech providers and the volume of their business may have on the business model of incumbent credit institutions?
This model will soon become subject to a deep change. Old-fashioned, centralised financial institutions are of no use in the world of modern communication technologies. What matters is the flexibility, adjustability and low cost of service. This will encourage consumers to get more benefits from the financial sector - they will use financial services much more frequently and to a greater extent. The FinTech is a technical emanation of this already algoing social and economic trend.
Question 8: Are the issues identified by the EBA and the way forward proposed in subsection 4.3.2 relevant and complete? If not, please explain why.
Not applicable to us, the PZIP does not include payment and electronic money institutions.
Question 9: What are your views on the impact that the use of technology-enabled financial innovation and/or the growth in the number of FinTech providers and the volume of their business may have on the business models of incumbent payment or electronic money institutions?
Not applicable to us.
Question 10: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.1 relevant and complete? If not, please explain why.
The chapter accurately addresses risks associated with unsufficient consumer information as to what party they are dealing with on each stage of a given transaction, and what legal measures they can take to pursue their rights. We suggest to put more attention onto consumer information issue to avoid misunderstandings, e.g. through introduction of simple charts and guidance on how certain procedure is structured (e.g. electronic payment via the online shop, acting as intermediary at shopping, insurance sale, money lending etc.) and ensuring possiblity to ask questions and get informative answers.
Question 11: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.2 relevant and complete? If not, please explain why.
We agree with the thesis that negative competition between legal systems of particular member states needs to be avoided. Rules need to be set which would as clearly as possible define the same level of consumer protection when dealing in cross-border FinTech transactions irrespective on in which member state the FinTech business entity and its client is located. It is important not just in terms of consumer protection but also for the real functioning of the EU's Digital Single Market. Further harmonisation of consumer rights and legal regimes governing lending institutions between the member states is in our opinion a very important contribution to the success of FinTech. The proposed measures find our support.
Question 12: As a FinTech firm, have you experienced any regulatory obstacles from a consumer protection perspective that might prevent you from providing or enabling the provision of financial services cross-border?
The PZIP is not a FinTech firm, it is a confederation of technologically advanced lending companies. Our members report various issues preventing them from penetrating other member states' markets, whereas the main are such as incompatibiliby of legal systems, various licensing/registration modes, inconsistency of regulations pertaining to the consumer credit e.g. as per the required form of contract with consumer (paper form vs. electronic or documentary), and alike.
Question 13: Do you consider that further action is required on the part of the EBA to ensure that EU financial services legislation within the EBA’s scope of action is implemented consistently across the EU?
Yes, we support the idea. It is vital to ensure that EU financial services legislation is implemented consistenly throughout the whole of the EU. It should open entirely new possibilities for Fintech branch, to the benefit of consumers and other market participants.
Question 14: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.3 relevant and complete? If not, please explain why.
Yes. We would like to stress the need to undertake measures as to make consumers' complaints' procedures more exact and reliable. It is of much importance that, despite the sophisticated structures of making decisions via automated processes, the consumers and all parties involved (i.e. entities taking part in a final offering of the FinTech service) are aware of their mutual rights and obligations. A reliable and visible contact/complaint possibility must be provided and there should be reliable procedures on how complaints and disputes are handed over.
Question 15: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.4 relevant and complete? If not, please explain why.
We support the idea of further digitalisation. Certain jurisdictions still demand paper form of contracts conducted via FinTech technologies. It generates unnecessary costs and long lasting procedures. Written form of contract, in particular when acting on distance, does not guarantee more security than digitised documentary form. The measures proposed by EBA we find adequate - we suggest to stress particularly on points "a", "c" and "e".
Question 16: Are there any specific disclosure or transparency of information requirements in your national legislation that you consider to be an obstacle to digitalisation and/or that you believe may prevent FinTech firms from entering the market?
As an example, the Polish Act on Consumer Credit of 2011 (Ustawa o kredycie konsumenckim z dn. 12.05.2011) provides in its Article 29 the traditional written form as the general form required to effectively execute consumer credit contract. We find it much unconvenient for the FinTech branch, further upon consideration of the fact that the Polish Civil Code since September 2016 does include modern form of contracting such as through exchange of digitised documents. It is of much importance that the said Article 29 be amended in a near future since it slows development of electronic lending.
Question 17: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.5 relevant and complete? If not, please explain why.
Yes, they are relevant and complete considering the importance of the issue as we estimate it.
Question 18: Would you see the merit in having specific financial literacy programmes targeting consumers to enhance trust in digital services?
Not much. The consumers need to be encouraged through a fast and low cost service which is the main advantage of FinTech services when compared to traditional. Administrative measures to enhance consumers knowledge of the market and their trust into new technologies is not of a priority importance. The development of new technologies proceeds so fast that it is virtually impossible for administration bodies to keep pace with it and provide consumers with actual market knowledge. However, what the consumers need to be aware of is how the system works, and to ensure that they are really able to decide themselves if the risk is more or less when compared to traditional financial services. Educating consumers in modern technologies should not be the task of regulators such as the EBA. In our opinion, the EBA would rather concentrate on ensuring that FinTech businesses are required to answer reasonable questions the consumers may have, and provide precise answers to how their services works. The real contacting possibilities and effective communication seem to be main factor here.
Question 19: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.6 relevant and complete? If not, please explain why.
We support the idea set in Point 127 - to further assess the Big-Data related issues in a future research of the EBA and other ESA bodies, and in particular with regard to prevent potential risks associated with use of artificial intelligence.
Question 20: Are the issues identified by the EBA and the way forward proposed in section 4.5 relevant and complete? If not, please explain why.
Yes, in our opinion they are both relevant and complete.
Question 21: Do you agree with the issues identified by the EBA and the way forward proposed in section 4.6? Are there any other issues you think the EBA should consider?
Yes, with agree with them. The anti-money laundering policies along with those aimed at combating financing of terrorism are major issues of today. We support the idea of defining distinction, as clearly as possible, between the right of freedom of contract and the necessity to prevent the above problems. The measures that are going to be implemented need to be precisely targeted in order not to discourage consumers from taking advantage of modern financial services. Digital technologies of processing financial data need to be implemented upon observation of the principle of transparency. The FinTech entities should cooperate with respective authorities when it comes to controlling sources of their financing. Respective requirements as to reporting may be of much help in this aspect.
Question 22: What do you think are the biggest money laundering and terrorist financing risks associated with FinTech firms? Please explain why.
The anonimity of financing sources. Proper reporting and tracing procedures could help.
Question 23: Are there any obstacles present in your national AML/CFT legislation which would prevent (a) FinTech firms from entering the market, and (b) FinTech solutions to be used by obliged entities in their customer due diligence process? Please explain.
Financing of terrorism and money laundering seem not to be a problem in Poland to the extent comparable with bigger Western capital markets. In our opinion, the Polish legislation does not impose particular limitations that would go behind of limitations already set by EU law.
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Bartłomiej Okoń