The U.S. Consumer Financial Protection Bureau (CFPB) issued a bulletin on Monday warning financial services firms about the use of sales incentives that can lead to consumer abuse.
In particular, the CFPB is focusing on sales incentives that encourage employees to put consumers into inappropriate products or to employ improper tactics to meet their sales goals.
The CFPB bulletin notes that “reasonable incentives” that are subject to proper oversight can benefit consumers by improving service and helping firms retain good employees. However, poorly designed incentives can also lead to consumer harm, the bulletin points out, including unauthorized fees, improper collections or negative impacts on consumer credit scores.
“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,” says Richard Cordray, the CFPB’s director, in a statement. “The CFPB is warning companies to make sure that their incentives operate to reward quality customer service, not fraud and abuse.”
The bulletin sets out practices that firms can use to detect, prevent and correct the use of these sorts of incentive structures.