CFPB Warns Financial Companies on Unchecked Sales Incentives

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By Jeff Bater

Nov. 28 — The Consumer Financial Protection Bureau warned financial companies about sales incentives that might lead to fraud two months after its crackdown on Wells Fargo.

The agency’s guidance released Nov. 28 outlines steps institutions can and should take to detect, prevent and correct such production incentives so they do not lead to abuse of consumers.

”Tying bonuses and job security to business goals that are unrealistic or not properly monitored can lead to illegal practices like unauthorized account openings and deceptive sales tactics,” CFPB Director Richard Cordray said. “The CFPB is warning companies to make sure that their incentives operate to reward quality customer service, not fraud and abuse.”

The bulletin warns firms that unchecked incentives may result in violations of consumer financial law. It listed examples of problems, including the opening of accounts without consent.

In September, the CFPB, the city of Los Angeles, and the Office of the Comptroller of the Currency fined Wells Fargo over allegations its employees secretly opened unauthorized accounts to hit sales tactics. Outrage over the scandal led to the resignation of the bank’s CEO, John Stumpf.

Other examples of incentive problems include misrepresentation of a product’s benefits and the steering of customers toward less-favorable terms.

“Despite their potential benefits, incentive programs can pose risks to consumers, especially when they create an unrealistic culture of high-pressure targets,” the bulletin said. “When such programs are not carefully and properly implemented and monitored, they may create incentives for employees or service providers to pursue overly aggressive marketing, sales, servicing, or collections tactics.”

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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