Hosty,
Incomplete compaction will be an issue for your dam. Typical reasons are..too little moisture during compaction, improper ratios of clay to erodable soils such as sand. Those are reasons your dam could sink as much as two feet.
Regarding sloughing, that's due to steep slopes, no vegetation to hold loose soils, or improperly compacted soils, or any combination of these factors.
Get in touch with your contractor as soon as possible. Unless he made you aware of these issues during construction, he should be held responsible, and take care of the problem before it becomes worse.
Be aware, this problem won't heal. It should be dealt with, quickly.

Teach a man to grow fish...
He can teach to catch fish...