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On March 9, the CFPB filed a complaint in the U.S. District Court for the Northern District of Illinois against a regional bank for alleged violations of TILA, the Truth in Savings Act and the Consumer Financial Protection Act relating to the bank’s sales practices. According to the complaint, the bank had instituted a “cross-sell” sales strategy along with sales goals to increase sales to customers. The complaint alleges that, although the bank knew that sales employees “engag[ed] in misconduct in order to meet goals or earn additional compensation,” the bank purportedly “took insufficient steps to properly implement and monitor its program, detect and stop misconduct, and identify and remediate harmed consumers.” The complaint alleges two claims for “abusiveness” in violation of the CFPA, which are the first such allegations since the Bureau issued a policy statement in January regarding its “abusiveness” standard, covered in InfoBytes here. Among other things, the Bureau seeks injunctive relief, monetary relief, disgorgement, and a civil money penalty. After the complaint was filed, the regional bank issued a press release rejecting the charges in the CFPB’s complaint.
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.”
- Benjamin W. Hutten to discuss "Understanding OFAC sanctions" at a NAFCU webinar
- Warren W. Traiger to discuss "Key takeaways from proposed CRA modernization" at the New York Bankers Association Technology, Compliance & Risk Management Forum
- Garylene D. Javier to discuss "Navigating workplace culture in 2020" at the DC Bar Conference