CFPB Issues Advisory Bulletin on Detecting and Preventing Consumer Harm from Production Incentives

Federal Issues Consumer Finance CFPB Compliance Sales Incentive Compensation

In a November 28 advisory bulletin entitled Detecting and Preventing Consumer Harm from Production Incentives, the CFPB highlights examples from its supervisory and enforcement experience in which incentives contributed to substantial consumer harm. The bulletin also describes compliance management steps that supervised entities should take to mitigate risks posed by incentives. Among other things, the CFPB clarifies that it is not outlawing sales incentives or other similar programs, but rather is cautioning companies that such programs can lead to abuse. As explained in the bulletin, “[t]ying bonuses or employment status to unrealistic sales goals or to the terms of transactions may intentionally or unintentionally encourage illegal practices such as unauthorized account openings, unauthorized opt-ins to overdraft services, deceptive sales tactics, and steering consumers into less favorable products.”