WASHINGTON (Legal Newsline) — The Consumer Financial Protection Bureau (CFPB) issued a bulletin Nov. 28 warning supervised financial companies that creating incentives for employees and service providers to meet sales and other business goals can lead to consumer harm if not properly managed.
“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,” said CFPB Director Richard Cordray. “The CFPB is warning companies to make sure their incentives operate to reward quality customer service, not fraud and abuse.”
Banks and other financial companies often use incentives to encourage employees toward business objectives. These incentives range from financial bonuses to monetary compensation. When executed properly, incentive-based performance can benefit consumers and they may receive improved customer service.
The CFPB noted specific problems that could arise, however, when financial companies allow unchecked incentives. These problems include employees opening accounts without consumer consent in order to meet sales goals, employees misrepresenting product benefits to sell more products and employees steering consumers toward less favorable products or terms. All of these are violations of consumer financial laws.