What you need to know about Coercive Tied Selling

Canada’s Bank Act requires all banks to inform consumers in plain language, that coercive tied selling is an illegal practice. Under section 459.1 of the Bank Act, banks are prohibited from practicing coercive tied selling. In compliance with the Act, we created this brochure to inform our customers on coercive tied selling.  

What is Coercive Tied Selling?

Coercive tied selling can be defined as imposed undue pressure placed on a consumer to obtain a product or service from a bank or its affiliates, as a condition for obtaining another product or service from the bank. This means that as a banking consumer, you cannot be put in a position of undue pressure to purchase a product or service in exchange for being granted approval for another product or service.

An example of coercive tied selling is depicted below to better define this illegal practice:

The above scenario illustrates coercive tied selling and is against the law. If you qualify for a product your banking representative is not allowed to unduly pressure you to buy another unwanted product or service as a condition of obtaining the original product requested.  

What is Not Considered Tied Selling?

Managing credit risk and certain sales practices aimed at showing appreciation for continued business may be confused with coercive tied selling. In fact, this practice is legitimate and is known as preferential pricing.

Preferential pricing refers to offering customers a better rate on all or a portion of their dealings in appreciation for their ongoing business. For example, a bank may offer a higher rate on investments or a lower rate on loans, in exchange for the customer using one or more of their products or services.

An example of Preferential Pricing is depicted below.