WASHINGTON—In the wake of the Wells Fargo scandal, the CFPB has issued a bulletin warning financial institutions that incentive-based programs for employees and service providers, such as those used for meeting goals, can lead to consumer harm if they are not properly managed.
The Bureau’s bulletin outlines several steps that financial institutions can and “should take,” according to the CFPB, to detect and prevent incentive-based programs from harming consumers, NAFCU explained.
“The Bureau, however, does note that ‘[when properly implemented and monitored, reasonable incentives can benefit all stakeholders and the financial marketplace as a whole,’” NAFCU noted.
The CFPB’s bulletin compiles guidance the Bureau has already given in other contexts and highlights examples from its supervisory and enforcement actions, NAFCU explained.
Specifically, the Bureau is warning against:
- Opening accounts without consent;
- Mispresenting benefits of products; and
- Steering consumers toward less favorable products or terms.
The Bureau added that to prevent incentives from leading to violations, financial institutions should ensure their compliance management systems are effective and, among other things, that their policies and procedures have clear controls for managing any inherent risk, NAFCU reported.