As Wells Fargo continues to dig itself out of a years-long — if not decade-long — fake account fiasco perpetrated by employees under strain from high-pressure sales goals, federal regulators are warning other financial institutions that these sorts of programs could harm consumers and possibly lead to stiff penalties.

The Consumer Financial Protection Bureau issued a compliance bulletin Monday urging supervised financial companies to take steps to ensure their incentive programs for employees and service providers to meet sales goals do not lead to improper — and illegal — actions.

According to the CFPB bulletin [PDF], tying bonuses or employment status to unrealistic sales goals or to the terms of transactions may intentionally or unintentionally encourage illegal practices such as unauthorized account openings, unauthorized opt-ins to overdraft services, deceptive sales tactics, and steering consumers into less favorable products — all practices that Wells Fargo employees were found to engage in for nearly a decade as a means to meeting sales goals and keep their jobs

While the Bureau recognizes that incentive programs have been used for years by financial institutions to reward and retain employees, it is concerned that if left unchecked, such programs could lead to additional Wells Fargo-like fiascos.

To that end, the CFPB outlined existing guidance on how to properly monitor and implement incentives.

• Board and Management Oversight — Executives, managers, and supervisors should work to ensure that customers are only offered products likely to benefit their interests; the programs should be viewed not only for their overall outcome, but also how they could harm consumers.

• Policies and Training — Financial institutions should provide employees with clear policies for incentives and provide training seminars to ensure that these policies are understood and implemented.

• Monitoring — Companies should design overall compliance monitoring programs that track key metrics that may indicate incentives are leading to improper behavior by employees or service providers.

• Corrective Action — If a company finds evidence of improper actions by employees tied to an incentive program, corrective action should be taken immediately; this could include termination, changes to incentive programs, and remediation for harmed customers.

• Independent Compliance Audits — Audits should be scheduled to address incentives and consumer outcomes across all products or services. Theses audits should be conducted independently of both the compliance program and the business functions.

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