Regulatory Requirements

What are Regulatory Requirements?

Regulatory requirements are rules and guidelines businesses must follow to comply with laws and regulations set by governments or regulatory bodies. They vary widely depending on the industry and jurisdiction, covering areas such as financial reporting, data protection, environmental impact, and employment practices.

While there are dozens of regulations businesses have to consider, we’re going to focus on sales and billing regulations on this page.

These two areas are particularly vital for three reasons:

  • They directly impact a company’s revenue.
  • They involve sensitive customer information.
  • Non-compliance can result in severe financial penalties.

One of the significant challenges businesses face is the complexity and diversity of regulations across different regions and sectors. Each country (and even state) has unique requirements and regulatory agencies, and frequent regulatory updates make staying compliant a moving target.

Still, navigating regulations effectively is crucial for businesses to operate smoothly across multiple jurisdictions, minimize legal risks, and maintain a competitive edge. Organizations need to be highly adaptive. And they often have to invest in dedicated compliance teams or technologies to monitor and implement necessary changes.

Synonyms

  • Compliance requirements
  • Legal requirements
  • Billing regulatory compliance
  • Sales regulatory compliance

Understanding Key Regulatory Landscapes

Sales Regulations

Sales regulations dictate what, how, and to whom businesses can sell their products or services. They protect consumers from fraud, false advertising, and predatory pricing practices (e.g., price fixing). They also ensure fair competition between businesses.

Sales regulations apply to both B2C and B2B companies. Let’s take a look at some of the key requirements in this area:

Fair and Accurate Credit Transactions Act (FACTA)

The Fair and Accurate Credit Transactions Act (FACTA) is a U.S. federal law enacted in 2003. It amends the Fair Credit Reporting Act (FCRA) to enhance consumer protections, particularly against identity theft.

The law affects a wide range of entities, primarily financial institutions and creditors. This includes banks, credit unions, mortgage lenders, and any businesses that extend credit or manage consumer credit information. Essentially, if your business involves handling consumer credit information or facilitating credit transactions, you are likely subject to FACTA’s regulations.

For businesses, complying with FACTA means implementing procedures to ensure the secure disposal of sensitive information, providing consumers with access to their credit reports, and complying with the Red Flags Rule to detect and prevent identity theft.

Telemarketing Sales Rule (TSR)

The Telemarketing Sales Rule (TSR) is a regulation established by the Federal Trade Commission (FTC) to protect consumers from deceptive and abusive telemarketing practices. Enacted in 1995, the TSR mandates that telemarketers…

  • Make all required disclosures to consumers, including the total cost of goods or services, any applicable restrictions, and refund policies
  • Obtain adequate consent before charging a consumer’s account (express written consent for calls made using an automatic telephone dialing system)
  • Maintain records of telemarketing transactions, including call details and customer consents, for at least five years
  • Adhere to calling hours between 8 a.m. and 9 p.m. and restrictions on who they can contact (e.g., Do Not Call Registry)
  • Abide by rules about transmitting Caller ID information
  • Only use specific payment methods (TSR forbids the use of cash-to-cash money transfers, cash reload mechanisms, and remotely created payment orders/checks)

The TSR applies to “any offer — domestic or foreign — made to consumers in the United States.” That includes businesses that use telemarketing to sell their products or services. It covers phone calls and text messages.

California Consumer Privacy Act (CCPA)

The California Consumer Privacy Act (CCPA) is a comprehensive privacy law that aims to enhance privacy rights and consumer protection for residents of California by granting them new rights regarding their personal information. It also imposes various data protection duties on businesses.

According to the California Department of Justice, the CCPA applies to for-profit businesses that collect and/or process the personal information of California residents and meet at least one of the following criteria:

  • “Have annual gross revenues exceeding $25 million”
  • “Buy, receive, or sell personal information of 100,000 or more California residents, households, or devices”
  • “Derive 50% or more of their annual revenues from selling California residents’ personal information”

Non-profit organizations and government agencies are generally exempt from CCPA requirements, although specific activities involving for-profit partnerships may fall under its purview.

To comply, you have to allow consumers to request and receive details about the personal information collected about them. You also need to offer consumers, employees, and job applicants the ability to opt out of the sale of their personal information.

Consumer Protection Laws

Consumer protection laws are designed to safeguard buyers from unfair, deceptive, or fraudulent practices across various industries.

Here are some key consumer protection laws that apply to different sectors:

  • Section 5 of the Federal Trade Commission (FTC) Act prohibits unfair or deceptive acts or practices in commerce. Consumers must be treated fairly and not misled or harmed by businesses.
  • The Consumer Product Safety Act provides for the development of safety standards and the recall of products that present significant risks to consumers​.
  • The CAN-SPAM Act regulates commercial email, requiring senders to include clear and accurate information, provide opt-out mechanisms, and honor opt-out requests promptly​.
  • The Fair Packaging and Labeling Act requires products to be labeled accurately.
  • Product liability laws hold manufacturers, wholesalers, distributors, and vendors accountable for damages caused by defective or dangerous products.
  • California’s price-gouging statute prohibits excessive price increases (more than 10%) on essential goods and services during emergencies.

There are also manufacturer-imposed requirements that ensure any price or territory restrictions imposed by manufacturers are reasonable and do not stifle competition.

General Data Protection Regulation (GDPR)

The General Data Protection Regulation (GDPR) is a comprehensive data protection law implemented by the European Union (EU) to safeguard the privacy and personal data of EU residents. It affects any organization, regardless of its location, that processes the personal data of individuals residing in the EU.

For businesses, GDPR imposes several obligations to ensure the protection and responsible use of personal data:

  • Data protection principles: Businesses lawfulness, fairness, transparency, purpose limitation, data minimization, accuracy, storage limitation, and integrity and confidentiality principles.
  • Data subject rights: Under GDPR, individuals have rights to data access, rectification, erasure (right to be forgotten), restriction on processing, data portability, and objecting to data processing​​.
  • Accountability and compliance: Businesses have to demonstrate GDPR compliance by maintaining detailed records of data processing activities. They have to conduct Data Protection Impact Assessments (DPIAs) for high-risk processing activities​​. Larger organizations need to appoint a Data Protection Officer (DPO).
  • Data notification: In the event of a data breach, businesses are required to notify the relevant supervisory authority within 72 hours and inform affected individuals if there is a high risk to their rights and freedoms​.

Note: DealHub is GDPR-compliant.

Unfair and Deceptive Practices

In the United States, the FTC regulates unfair or deceptive acts or practices in commerce under Section 5 of the FTC Act. Unfair and deceptive practices refer to any misleading or fraudulent activities that could potentially harm consumers.

These include:

  • False advertising
  • Dishonest pricing
  • Hidden fees
  • Failure to honor warranties

While some deception (e.g., “25 miles per gallon” on a car that only gets 23) isn’t as serious as other kinds, these practices can cause serious harm to consumers. This is especially true in industries like healthcare, financial services, supplements, and cosmetics, where misleading practices can have significant consequences for individuals’ well-being and financial stability.

State-Specific Regulations

When doing business in the United States, it is crucial to understand that, in addition to federal regulations, each state might have specific laws affecting how you conduct business. Federal agencies only regulate certain industries, and state agencies often oversee those that aren’t federally regulated.

For example:

  • New York mandates a consumer’s right to return certain items within a specific period.
  • California has specific laws under the Song-Beverly Consumer Warranty Act that require retailers to offer a “cooling-off” period for certain transactions.
  • Florida’s Lemon Law requires manufacturers to repair or replace defective new vehicles.
  • New Jersey’s Consumer Fraud Act requires transparency in advertising.
  • Massachusetts law specifically requires accurate price labeling.
  • Alabama’s Simplified Sellers Use Tax Program aims to streamline tax collection for remote sellers, but compliance details are intricate.

Before conducting business in a certain state, review its specific regulations. State government websites and legal resources can provide up-to-date information.

Billing Regulations

Regulations for billing compliance focus on fair and honest billing practices and giving customers a transparent understanding of charges. Even if it’s not consumer-facing, businesses have to keep track of their sales tax and monitor its collection, as well as other taxes they need to pay.

Here’s a look at different billing and recordkeeping requirements and how they impact your business:

State Sales Tax Compliance

Most states in the US have a sales tax that applies to goods and services sold in that state. It’s the seller’s responsibility to collect this tax from customers, and businesses must register for a sales tax license with the state.

There are no federal-level sales taxes, and each state can set its rules and rates individually. Some products are exempt from sales tax, such as groceries and prescription medications.

Receipts and sales invoices must include specific details such as the total sales amount, the amount of sales tax charged, and the applicable tax rate. On invoices, some states require additional information, such as the seller’s and buyer’s addresses.

Businesses must file sales tax returns and remit collected taxes to the appropriate state and local tax authorities, typically on the 20th day of the month after the end of the taxable period. Periods may be monthly, quarterly, or annually, depending on the state and the volume of sales.

Sarbanes-Oxley Act (SOX) for Public U.S. Companies

The Sarbanes-Oxley Act (SOX) of 2002 is a federal law enacted in response to major financial scandals involving Enron, WorldCom, and Tyco International. Its primary goal is to protect investors from fraudulent financial reporting. SOX establishes stringent reforms to improve corporate governance, enhance financial disclosures, and combat corporate and accounting fraud.

Under SOX Section 404, companies must implement robust internal controls over financial reporting. This includes controls over the billing process to ensure accuracy and integrity.

Businesses must document and test billing procedures, identify potential risks and errors, and establish controls to mitigate these risks. Regular audits and reviews of billing systems are absolutely necessary to comply with SOX requirements.

PCI DSS for Businesses Accepting Credit Cards

The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that all companies that accept, process, store, or transmit credit card information maintain a secure environment.

Key objectives of PCI DSS include:

  • Build and maintain a secure network and systems
  • Protect cardholder data
  • Maintain a vulnerability management program
  • Implement strong access control measures
  • Regularly monitor and test networks
  • Maintain an information security policy

You have to ensure your billing software is equipped with the necessary security features to comply with PCI DSS. Failure to do so can result in penalties and fines, as well as loss of customer trust.

HIPAA for Healthcare Billing

The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that establishes national standards for the protection of certain health information. It sets privacy, security, and breach notification rules for healthcare providers, insurers, and related entities.

As it pertains to billing compliance, HIPAA requires organizations to implement proper safeguards when handling electronic protected health information (ePHI) during the billing process. This includes:

  • Encrypting ePHI in transit and at rest
  • Implementing access controls to limit who can view ePHI
  • Regularly reviewing and updating procedures to protect against potential risks or breaches

Failure to comply with HIPAA can result in significant fines and damage to a healthcare provider’s reputation, given the highly sensitive nature of patient data.

Value Added Tax (VAT) for International Businesses

Value Added Tax (VAT) is a consumption tax used in many countries around the world. It’s similar to sales tax, but it applies to the added value at each stage of production and distribution, rather than just at the point of sale.

If your business operates globally or has international customers, you will be required to register for VAT in certain countries and charge the tax on applicable sales. You’ll also be responsible for remitting the collected VAT to the appropriate tax authority.

Implementing Processes for Regulatory Compliance

Adhering to regulatory compliance requirements sounds complicated, but it’s actually not too difficult with the right tools and processes in place.

That said, the costs of non-compliance are severe:

  • Damage to your brand reputation
  • Penalties and fines
  • Legal action
  • Loss of business opportunities

Organizations lose an average of $5.87 million in revenue for a single non-compliance event, so a failure to take it seriously will tremendously hurt your business.

There are two elements to ensuring compliance: streamlining your sales and billing processes and building a culture of compliance in your organization.

Streamlining Sales and Billing Processes

Your ability to streamline sales and billing processes relies heavily on having the right technology in place. An automated billing system that integrates with your CRM can significantly reduce human error, streamline data management, automate tax calculations, and keep your records up-to-date. It’s the single best way to ensure compliance with federal, state, and local regulations.

Additionally, having a streamlined contract management process is crucial. This includes:

  • Ensuring contracts are reviewed and approved by legal before execution
  • Storing all contracts in a secure, centralized location for easy access
  • Tracking and managing contract data, such as expiration dates and renewal terms
  • Utilizing electronic signature tools for a faster, more secure signing process
  • Standardizing customer contracts and invoices

Some CPQ (configure, price, quote) tools, including DealHub, extend their capabilities to contract management and billing. By integrating all your sales and billing systems with the same vendor, you’ll reduce complexity, minimize the risk of manual errors, and ensure compliance across the board.

Building a Culture of Compliance

Making compliance a core priority for your company makes all the difference. If your team members aren’t genuinely concerned with it on a daily basis, they won’t follow processes, use the right tools, or be proactive about identifying potential risks.

Ensure compliance is part of your company’s ethos by:

  • Providing regular training and education on regulations and compliance procedures
  • Rewarding and recognizing team members who go above and beyond in managing compliance
  • Creating an open-door policy for reporting and addressing potential compliance issues
  • Conducting routine audits and reviews to identify areas for improvement and ensure ongoing compliance

All of your team members shoujld be well-versed in data security best practices, including proper handling of sensitive customer information and maintaining confidentiality. And when regulatory changes or updates affect your business, they should be the first to know.

Key Takeaways on Regulatory Requirements

It’s important to remember that compliance is an ongoing process, not a one-time event. Stay proactive and regularly review and update your processes to stay compliant with regulations and protect your business.

Beyond that, ensuring compliance is a team effort that requires constant communication, training, and monitoring. With the right tools and cultural mindset, you can avoid the negative consequences of non-compliance and build long-lasting trust with your customers.

Here are a few resources to help you stay up-to-date on regulatory requirements and best practices:

  • Federal Register Official daily publication for rules, proposed rules, and notices of Federal agencies.
  • Thomson Reuters Checkpoint Updates on tax and accounting regulations.
  • ComplianceOnline Newslettersn and web updates on hundreds compliance topics including healthcare, finance, and manufacturing.
  • MetricStream A cloud-based platform for tracking regulatory changes, offering real-time updates and compliance management tools.

For complex regulations, it’s best to seek professional guidance (or, for larger organizations, hire internally). The cost may seem daunting, but it’s a small price to pay compared to the potential consequences of non-compliance.

People Also Ask

What are the 4 Ps of regulatory compliance?

The “Four P’s” of regulatory compliance are Policies, Processes, People, and Proof. “Policies” refers to the written rules and guidelines that define your company’s approach to compliance.

“Processes” refer to the specific steps and actions you take to ensure compliance, such as regular audits and reviews. “People” are the individual team members responsible for implementing and following compliance procedures. And “Proof” refers to the documentation and evidence you have to show that your company is complying with regulations.

What is a regulatory compliance checklist?

A regulatory compliance checklist is a comprehensive list of requirements that an organization must meet to comply with regulations. It outlines all the necessary policies, processes, and procedures that need to be in place to ensure compliance.

A checklist can serve as a helpful tool for organizations to stay organized and track their progress in meeting regulatory requirements.  Some common items on a regulatory compliance checklist may include data security protocols, employee training programs, record-keeping procedures, and audit schedules.

Of course, the specific items on a checklist will vary depending on the industry and regulations that apply to the organization.

What happens if regulatory policies for a business are violated?

If a business violates regulatory policies, it can face serious consequences, including fines, penalties, and legal action. In addition, violating regulations can damage a company’s reputation and customer trust.

The severity of the consequences will depend on the specific regulation that was violated and how severe the violation was. In some cases, repeated or intentional violations may result in criminal charges for the individuals responsible for overseeing compliance.

To avoid these negative outcomes, companies should prioritize implementing strong compliance procedures and regularly reviewing and updating them to ensure ongoing compliance with regulations.