What you need to know
What is Coercive Tied Selling?
The Bank Act prohibits banks from imposing undue pressure on a person, or coercing a person, for any purpose, including to obtain a product or service from a particular person – including the institution and any of its affiliates – as a condition for obtaining another product or service from institution or taking advantage of a person. 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 not imposing undue pressure or taking advantage of a person. Should you ever believe that you have experienced prohibited conduct including 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?
If you have questions, visit our Contact Us page
For information about how to make a complaint, visit our Problem Resolution page.