The Consumer Financial Protection Bureau today issued a bulletin outlining expectations for incentive compensation programs. The bulletin compiles guidance previously issued by the bureau in other contexts and highlights examples from the agency’s supervisory and enforcement experience. While the bureau acknowledged that properly managed incentive programs can benefit both companies and customers, and that the types of incentive programs used by banks vary widely, it cautioned financial institutions that inadequate oversight or setting unrealistic goals could lead to consumer harm.
To ensure consumer protection, the bureau reiterated its expectation that banks using incentive programs have proper compliance management systems in place to monitor and quickly respond to any potential violations of consumer protection laws. While the CFPB does not require any particular compliance management system, it recommended that a CMS be appropriately tailored to reflect the risk, nature and significance of the institution’s incentive programs. For more information, contact ABA’s Virginia O’Neill.