Coercive tied selling and other prohibited conduct
Drawing the line at coercive tied selling and other prohibited conduct
The Bank Act requires banks to inform clients and the public that we will not impose undue pressure on a person, or coerce a person, for any purpose, including to obtain a product or service from a particular person, as a condition for obtaining another product or service from the bank, known as coercive tied selling, or take advantage of a person. All of these practices are prohibited conduct and are against the law.
To comply with the law, CIBC has created this guide to help you understand prohibited conduct, including coercive tied selling.
What is prohibited conduct?
Simply put, prohibited conduct refers to a bank imposing undue pressure on a person, or coercing a person, for any purpose, or taking advantage of a person, in its dealings with customers and the public.
Coercive tied selling is one example of prohibited conduct that involves a bank imposing undue pressure on or coercing a person to obtain a product or service from a particular person, including the bank or any of its affiliates, as a condition for obtaining another product or service from the bank.
Making these practices illegal means you get the product or service you want without being unduly pressured, coerced or taken advantage of.
Examples of prohibited conduct
You’ve been a loyal client dealing with your bank’s banking centre for several years. One of your advisors tells you that she’s behind on her monthly targets and asks you to open a new credit card even though you don’t need or want one.
You attend the banking centre for a servicing request. The advisor offers a credit card; you decline saying you don’t need one. The advisor continues to offer the credit card. Each time you provide a reason for not needing it, they counter your response. You relent and agree to the credit card.
Examples of prohibited conduct involving coercive tied selling
Your bank’s mortgage specialist tells you that you qualify for a home mortgage. However, you’re 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 don’t want to move your investments.
You’re advised that you qualify for a Registered Retirement Savings Plan (RRSP) loan. However, you’re also told that the bank will approve the loan only if you use the money to buy the bank’s mutual funds. You want the loan, but you want to invest the money elsewhere.
All of these practices are against the law. You shouldn’t be pressured or coerced to purchase a product or service you neither want nor need. A bank employee should never take advantage of you, your relationship with the bank, or your situation to sell you a product or service you don’t need or want. If you qualify for a product, a banking representative isn’t 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 CIBC, 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, can offer you better prices or more favourable terms and aren’t examples of prohibited conduct.
Preferential pricing means offering clients 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.
Examples of 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.
After approving your application for an RRSP loan, the bank offers you a lower interest rate if you use the loan to buy the bank’s mutual funds.
The above conduct is acceptable. The approval of your mortgage or your RRSP loan is not conditional on your taking another bank product or service. Rather, you’re offered preferential pricing to encourage you to give the bank more business.
Bundling of products and services
Products or services are often combined to offer you better prices, incentives or more favourable terms 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 3 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.
You plan to open a bank account that charges you a monthly fee. You’re offered a package of services that includes a comparable bank account, a savings account, overdraft protection and a credit card. The total fees for the package are 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 allows them 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.
An example of risk management
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.
Requiring your business’ operating account to be at the bank is permitted because it allows your bank to assess possible risks associated with your business’ cash flow and manage the risk associated with the loan.
What can you expect from us?
You can expect all employees at CIBC to comply with the law by not engaging in prohibited conduct, including coercive tied selling. To that end, we provide training programs to our employees on acceptable sales practices. We urge you to let us know if you believe that you’ve experienced any prohibited conduct, including coercive tied selling, in any dealings with us.
Please let us know if you have any questions, complaints or concerns about your dealings with CIBC: