The Consumer Financial Protection Bureau (CFPB) will likely be weakened by the incoming Trump administration and its Republican allies in Congress. Exactly how, and how much, remains to be seen, however—and, in the meantime, the agency continues to make its presence felt. Earlier this week, the CFPB warned companies that it oversees to take steps to ensure that their incentive compensation programs are not likely to motivate unethical conduct by employees. The types of unethical conduct that the CFPB wants to ensure that companies are guarding against might include employees creating fake accounts, as happened at Wells Fargo & Co., or enticing consumers to sign up for products they neither want nor need. But the CFPB made clear in its warning to companies that its concerns over sales practices go beyond situations similar to Wells Fargo’s fake account scandal. In other words, as has at times been the case with the CFPB, it is casting a broad net, but not necessarily saying what specifically it intends to catch with that net.
The federal consumer protection watchdog said that banks, mortgage lenders, payday lenders and other firms that it regulates should review their compensation policies on a regular basis. In doing so, these types of companies need to make sure that they are not creating the wrong kinds of incentives, ones that may lead employees to conclude that they must engage in potentially fraudulent activity in order to meet inflated sales goals. In particular, companies should undertake a comprehensive analysis of their compliance management systems. Boards of Directors will be expected to increase their level of oversight to make sure that appropriate policies and incentives are in place and are being followed. Continue Reading