Coercive Tied Selling
What you need to know
What is Coercive Tied Selling?
Section 459.1 of the Bank Act prohibits banks from practicing coercive tied selling. More specifically, it is against the law for a bank to “impose undue pressure on, or coerce, a person to obtain a product or service from a particular person, including the bank and any of its affiliates, as a condition for obtaining another product or service from the bank.” What this means is you cannot be unduly pressured to buy a product or service you don’t want, from a bank or one of its affiliates, to obtain another bank product or service. The following two examples help clarify the meaning of coercive tied selling and the kind of practices that are prohibited.
The bank informs you that you qualify for a home mortgage. However, you are also told that the bank will only approve your mortgage if you transfer your investments to the bank or one of its affiliates. Although you want the mortgage, you have no desire to move your investments.
The bank tells you that you qualify for a Registered Savings Plan (RSP) loan. However, you are also told that the bank will only approve the loan if you invest in an investment product offered by the bank and/or its affiliates. While you want the loan, you would rather invest the money somewhere else.
Both practices are against the law. If you qualify for a product, a bank is not allowed to unduly pressure you to buy another unwanted product or service as a condition for obtaining the product you want.
What is Our Commitment to You?
At B2B Bank, we require from all our employees to fully comply with the law by staying clear of coercive tied selling. Should you ever believe that you have experienced coercive tied selling in any dealings with us, we urge you to let us know about it. You can find out how to get in touch with us in the “Contact Us” section below.
What is Not Coercive Tied Selling?
Most businesses, including banks, look for tangible ways to show their interest in your business. Sales practices, such as preferential pricing and bundling of products and services, offer potential and existing customers better prices or more favourable terms. Such practices should not be confused with coercive tied selling, as defined by the Bank Act. The same also applies to practices used by a bank in managing the credit risk.
What is Preferential Pricing?
Preferential pricing means offering customers a better price or rate on all or part of their business. For example, a computer store could offer a discounted price on colour printers to clients who purchase a computer at the same time. A shoe store could offer a second pair of shoes at half price.
Similarly, a bank may be able to offer you preferential pricing – a higher interest rate on investment products or a lower interest rate on loans – if you use more of its products or services. The following example will help explain how preferential pricing can be applied in banks.
After approving your application for a home mortgage, the bank offers a discounted interest rate for an RSP loan.
After approving your application for an RSP loan, the bank offers you a higher rate of interest on an investment product offered by the bank and/or its affiliates.
The above practices are acceptable. The approval of your mortgage and RSP loan is not conditional on you taking another product or service from the bank. Rather, you are offered preferential pricing to encourage you to give the bank more business.
What is Bundling of Products and Services?
Products or services are often combined to give consumers better prices, incentives or more favourable terms. By linking or bundling their products or services, businesses are often able to offer them to you at a lower combined price than if you bought each product on its own. For example, a fast-food chain advertises a meal combination that includes a hamburger, fries and a drink. The overall price is lower than if you bought the three items separately.
Similarly, banks may offer you bundled financial services or products so that you can take advantage of package prices that are less than the sum of the individual items. The following example helps explain the bundling of bank products and services.
You want to take out an investment loan with the bank. The bank offers you a lower interest rate on an investment loan, if it is bundled together with an investment product offered by the bank and/or its affiliates. The total price for the package is less favorable to you if you obtained the loan separately by not investing in the bank’s (or bank affiliate’s) investment product. Bundling products is allowed since you have the choice of getting these products individually or in a package.
How Do We Manage Our Credit Risk?
To ensure the safety of their depositors, creditors and shareholders, banks must carefully manage the risk on the loans and credit cards they approve. Therefore, the law allows us to impose certain requirements on borrowers as a condition for granting a loan - but only to the extent necessary for us to manage our risk.
The following example helps explain how banks manage such risk.
You apply for an operating loan for your business. To manage the risk associated with the loan, the bank requires your business to have an operating account with the bank as a condition for obtaining the loan.
The above example is legal and appropriate. Having your business operating account at the bank allows your bank to assess possible risks associated with your business cash flow and manage the risk associated with the loan.
At B2B Bank, we make sure our requirements for borrowers remain reasonable and consistent with our level of risk.
How Can You Contact Us?
Step One: Raise your concern
Our problem resolution process ensures that any issue or concern you may have is dealt with in a professional and consistent manner. Simply contact your financial advisor or one of our Client Service Representatives at 1.800.263.8349 (locally at 416.947.7427) or at 1.866.334.4434.
You may also express your concerns to us in writing at:
Problem Resolution Analyst
199 Bay Street, Suite 600
PO Box 279 STN Commerce Court
Toronto ON M5L 0A2
Step Two: For an additional evaluation
If you are not satisfied with how your concerns have been handled, please let us know. We will escalate the issue to a representative of Senior Management. You may contact Senior Management at:
Vice President, Operations
199 Bay Street, Suite 600
PO Box 279 STN Commerce Court
Toronto ON M5L 0A2
Step Three: Contact the B2B Bank
If you have followed Steps One and Two and you are not satisfied with the resolution provided to you by B2B Bank, you may contact the B2B Bank Ombudsman. The B2B Bank Ombudsman will impartially investigate your concern and can be reached at:
B2B Bank Ombudsman Office
1360 René-Lévesque Boulevard West, Suite 600
Montreal QC H3G 0E5
Tel.: 514.284.7192 or 1.800.479.1244
Still not satisfied?
If after escalating your concerns to the B2B Bank Ombudsman you are still not satisfied with how your concerns have been resolved, or if your complaint has not been resolved within 90 days, you may escalate your matter to the:
Ombudsman for Banking Services and Investments
401 Bay Street, Suite 1505
PO Box 5
Toronto ON M5H 2Y4
Tel.: 416.287.2877 or 1.888.451.4519
Fax: 416.225.4722 or 1.888.422.2865
Contacting the Financial Consumer Agency of Canada (FCAC)
The FCAC supervises federally regulated financial institutions to ensure they comply with federal consumer protection laws and voluntary commitments and codes of conduct. If you have a complaint that you believe may involve a violation of a consumer protection law, a public commitment or code of conduct, you may contact the FCAC at: