The Bank Act prohibits banks from practising 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.” You cannot be unduly pressured to buy a product or service that you don’t want, from a bank or one of its affiliates, to obtain another bank product or service.
The following example will help to explain coercive tied selling and what is not allowed:
A Wealth One Bank of Canada banking representative tells you that you qualify for a home mortgage. However, you are also told that Wealth One Bank of Canada will approve your mortgage only if you transfer your investments to a Wealth One Bank of Canada GIC. You want the mortgage, but you do not want to move your investments.
The above practice is against the law. If you qualify for a product, a banking representative is not allowed to excessively pressure you to buy another unwanted product or service as a condition of obtaining the product you want.
We expect all employees at Wealth One Bank of Canada to comply with the law by not practising coercive tied selling. We urge you to let us know if you believe that you have experienced coercive tied selling in any dealings with us.
Most businesses, including Wealth One Bank of Canada, 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 printer offers a lower price for each business card if you buy a thousand cards instead of a hundred. A shoe store offers a second pair of shoes at half 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 two examples will help to explain preferential pricing in banks:
The above practices are acceptable. The approval of your mortgage and RSP loan is not conditional on your taking another bank product or service. Rather you are offered preferential pricing to encourage you to give the bank more business.
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 will help to explain the bundling of bank products and services:
You plan to open a bank account that charges you for individual transactions. The banking representative offers you a package of services that includes a comparable bank account, and a discount on your mortgage servicing fees. 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 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 will help to explain how banks manage such risk:
You apply for a mortgage 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 mortgage loan.
At Wealth One Bank of Canada, our requirements for borrowers will be reasonable and consistent with our level of risk.
Please let us know if you have any questions, complaints or concerns or about your dealings with Wealth One Bank of Canada. Our Chief Compliance Officer’s contact information is set out below: