Report on Sales Incentives and Responsible Lending: A Study of the Impact of Sales Incentives on the Sale of Credit Products

This Report on Sales Incentives and Responsible Lending represents the output of a detailed survey of regulators in 24 jurisdictions across a range of consumer credit products, as well as a review of international literature published on this topic to date. It forms part of FinCoNet’s continuing work on responsible lending, building on the 2014 FinCoNet report on responsible lending: Review of supervisory tools for suitable consumer lending practices.

The Report finds ample evidence that poorly designed sales incentives can cause harm to consumers, individual firms and the financial system. Such harm can include not only unsuitable sales to individual consumers but also a more general erosion of a consumer-focussed culture within individual firms and across an entire sector or industry. The Report also highlights that poorly designed sales incentives are especially prone to cause harm in the case of credit, where the consumer gets the financial benefit of the product up-front (giving rise to particular behavioural risks).