The Consumer Financial Protection Bureau (CFPB) issued a bulletin on Monday warning supervised financial companies that creating incentives for employees and service providers to meet sales and other business goals can lead to consumer harm if not properly managed.

“Tying bonuses and job security to business goals that are unrealistic or not properly monitored can lead to illegal practices like unauthorized account openings and deceptive sales tactics,” said CFPB Director Richard Cordray, in a statement. “The CFPB is warning companies to make sure that their incentives operate to reward quality customer service, not fraud and abuse.”

In early September, CFPB cracked down on Wells Fargo after the bank’s employees opened 2 million unauthorized accounts to reach cross-sale goals. Wells Fargo was fined a total of $185 million by the CFPB for its widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.

The bank has continued to face scrutiny, and following the Wells Fargo scandal, the Financial Industry Regulatory Authority launched a sweep of broker-dealers’ cross-selling practices.

The CFPB’s bulletin warns financial companies that unchecked incentives may lead to violations of consumer financial law.

Banks and other financial companies use incentives – particularly in many consumer financial markets, such as credit cards, mortgages, checking accounts and debt collection – to encourage their employees and service providers to accomplish business objectives. These programs commonly reward employees or services providers for selling or referring new products or services to existing customers, signing up new customers, selling products and services at higher prices, or meeting target amounts for debt collections.

According to the CFPB, 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.

The CFPB outlines various steps that institutions can and should take to detect, prevent and correct such production incentives so that they do not lead to abuse of consumers.

The CFPB bulletin suggests that a company’s compliance management system should include a board of directors and management oversight, a consumer complaint management program and an independent compliance audit.

The compliance program should include policies and procedures, training, and monitoring and corrective action. According to the CFPB, corrective actions should include the termination of employees, service provider and managers as necessary, as well as changes to the structure of incentives, training on these programs, and return of funds to all affected consumers as appropriate in light of failed sales or heightened levels of customer dissatisfaction.

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