Tied Coercive Selling
What You Need to Know
The Bank Act requires banks to inform customers in plain language that coercive tied selling is illegal. As a result, HomeEquity Bank has created this outline to help you better understand coercive tied selling.
What is Coercive Tied Selling?
Coercive tied selling is illegal and is prohibited under Section 459.1 of the Bank Act. 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”. Therefore, as a customer of any Canadian bank, you cannot be unduly pressured to buy a product or service that you don’t want from that bank or any of its affiliates, in order to obtain another bank product or service.
The following example will help you understand coercive tied selling and what is not allowed.
Your bank’s mortgage specialist tells you that you qualify for a home mortgage. However, you are also told that the bank will approve your mortgage only if you transfer your investments to the bank or its affiliates. You want the mortgage, but you do not want to move your investments.
The above noted practice is clearly against the law. If you qualify for a product, a banking representative is not allowed to unduly pressure you into buying an unwanted product or service as a condition of obtaining the product you want.
What is not Coercive Tied Selling?
Most businesses, including HomeEquity Bank, look for tangible ways to show their interest in your business and appreciation for your loyalty. Sales practices, such as preferential pricing and bundling of products and services, offer potential and existing customers better prices or more favourable terms. These practices should not be confused with coercive tied selling, as defined by the Bank Act. Many of these practices will be familiar to you in your dealings with other businesses.
Preferential pricing means offering customers a better price or rate on all or part of their business. For example, a restaurant offers you a second meal at half price when you buy one at the regular price.
Similarly, a bank may be able to offer you preferential pricing – a higher interest rate on investments or a lower interest rate on loans – if you use more of its products or services.
The following example will help you understand preferential pricing in banks.
After approving your application for a home mortgage, your bank’s mortgage specialist tells you that this mortgage would be available at a lower interest rate if you transferred your investments to the bank or its affiliates.
The above practices are acceptable. The approval of the mortgage is not conditional on you taking another bank product or service. Rather you are offered preferential pricing to encourage you to give the bank more business.
Bundling of Products and Services
Products or services can often be 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 consumers at a lower combined price than if each product were purchased 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 will help you understand the bundling of bank products and services.
You plan to open a bank account that charges you for individual transactions. You are offered a package of services that includes a comparable bank account, a credit card with no annual fee and a discount on purchasing traveller’s cheques. The total price for the package is less than if you purchased each part of the package separately.
Bundling products in this way is permitted because you have the choice of buying the items individually or in a package.
To ensure the safety of their depositors, creditors and shareholders, banks must carefully manage the risk on the loans and credit cards they approve. The law, therefore, allows the imposition of certain requirements on borrowers as a condition for granting a loan.
The following example will help you understand how banks manage such risk.
You apply for an operating loan for your business. To manage the risk associated with the loan, your 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 HomeEquity Bank, our requirements for borrowers will always be reasonable and consistent with our level of risk.
What Can You Expect From Us?
You can expect all employees at HomeEquity Bank to comply with the law by not practicing coercive tied selling. To ensure this is the case, we provide ongoing training programs and refreshers for all personnel on acceptable sales practices. We urge you to let us know if you believe that you have experienced coercive tied selling in any dealings with us.
How Can You Contact Us?
Please let us know if you have any questions, complaints or concerns about your dealings with HomeEquity Bank:
Please contact the HomeEquity Bank Customer Care Representative at:
Telephone: (877) 915-2447
Customer Care Representative
1881 Yonge Street, Suite 300
Toronto, Ontario M4S 3C4
Be sure to include:
Your name and contact information
The nature of your question or concern
The name of any individual with whom you have already discussed the issue
You can also contact the Financial Consumer Agency of Canada (FCAC) with a regulatory complaint in writing at:
Financial Consumer Agency of Canada
6th Floor, Enterprise Building
427 Laurier Ave. West
Ottawa, Ontario K1R 1B9
The FCAC will determine whether HomeEquity Bank is in compliance though it will not resolve individual consumer complaints.