CFPB Warns Banks about Deceptive Sales Practices
Incentives that banks offer employees to increase sales can pose “significant” risks to consumers, the CFPB warned this week in a new bulletin following record fines assessed to Wells Fargo for opening millions of unauthorized consumer accounts.
The bulletin said that the “intended and unintended effects of incentives can be complex, which makes this subject worthy of more careful attention by institutional leadership, compliance officers and regulators alike.” The federal agency goes on to acknowledge that “properly implemented and monitored” incentives can attract and retain top employees and can lead to better customer service.
The bulletin directly addresses how sales goals set by financial services firms can lead to the opening of unauthorized accounts, or lead to the enrollment of consumers in services they did not request. The CFPB on Sept. 8 announced a $100 million fine against Wells Fargo for what the agency called “widespread unlawful sales practices.” The agency said the fine is the largest such penalty it has ever issued. According to the CFPB, Wells Fargo employees secretly opened new accounts, into which they shifted funds from existing accounts without consumers’ knowledge or permission—often racking up fees and other charges.
That’s not the only practice the CFPB warns about in its bulletin. For example, the agency said that since its formation in 2011, it has “resolved 12 different cases involving improper practices to market credit card add-on products or to retain consumers once enrolled in these products. Tapes of sales calls showed that employees and service providers deviated from the prepared call scripts in order to market the add-on products more aggressively, and often deceptively, to sign up more consumers.”
The agency is currently fighting a court ruling that said its structure is unconstitutional.