On Compliance: Cross-selling risks after Wells Fargo

CUs must review incentive programs and compliance with FCRA and TCPA.

The news stories following the Wells Fargo incentive scandal continue—negatively impacting the bank and its auditors and examiners—with no end in sight. While the likelihood we will see a credit union embroiled in a Wells Fargo-type cross-selling scandal is small, the legal and compliance risks related to cross-selling products and services has certainly increased. Below are three areas of future focus by examiners and auditors. Credit unions can stay ahead by reviewing their compliance in these areas and fixing deficiencies as they are identified.

Incentive Programs and UDAAP

In response to the Wells Fargo scandal, the Consumer Financial Protection Bureau issued Compliance Bulletin 2016-03, which focuses on the potential consumer harm from production incentives. CFPB acknowledges the benefits of incentives—including those tied to cross-selling—but also warns of the possibility for “overly aggressive marketing, sales, servicing, or collection tactics.” The agency indicated that past examinations have identified accounts being opened without consumer consent and situations in which consumers were misled to purchase products they did not want.

While only a handful of credit unions are directly examined by CFPB, the expectations from the Compliance Bulletin—including management oversight, policies and procedures, training, and monitoring—will surely trickle down to credit union examiners and auditors. Credit unions with incentive programs should take steps now to review their incentive programs and make the necessary adjustments to manage compliance and reputation risks.


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