What You Need to Know About Coercive Tied Selling
Why Did we Create This Document?
The Bank Act requires Canadian chartered and Authorized Foreign Banks to inform customers in plain language that coercive tied selling is illegal. To comply with the law, PNC BANK CANADA BRANCH, an authorized branch of PNC Bank, N.A., has created this document explaining
What is Coercive Tied Selling?
Section 576.1 of the Bank Act prohibits an Authorized Foreign Bank (hereinafter referred to as a "bank") such as PNC BANK CANADA BRANCH from practicing 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 authorized foreign bank and any of its affiliates, as a condition for obtaining another product or service from the authorized foreign bank." Thus, a bank may not unduly pressure you to buy a product or service that you do not want from the bank, one of its affiliates or any other person in order to obtain another bank product or service from the bank.
The following two examples will help to explain prohibited coercive tied selling.
Your bank’s loan officer tells you that your company qualifies for a commercial loan. However, you also are told that the bank will approve the loan only if your company also transfers its cash management activity, including lock box, to the bank or its affiliates. You want the commercial loan, but you do not want to move your company’s cash management activity to the bank. Your bank’s loan officer tells you that your company qualifies for a commercial loan. However, you also are told that the bank will approve the loan only if your company uses the bank or its affiliates to underwrite a securities offering being contemplated by the company. You want the loan, but you do not want to use the bank or its affiliate as the company’s securities underwriter.
Both of the above practices are against the law. If you otherwise qualify for a product or service from a bank, a representative of the bank is not allowed to excessively pressure you to buy another unwanted product or service as a condition of obtaining the product or service you want.
What is Our Commitment to You?
We expect all employees at PNC BANK CANADA BRANCH to comply with the law by not practicing 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. You can find out how to contact us at the end of this brochure.
What is NOT Coercive Tied Selling?
Most businesses, including PNC BANK CANADA BRANCH, 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.
What is Preferential Pricing?
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 permissible preferential pricing by banks.
While negotiating with a bank to obtain a commercial loan for your company, the bank’s loan officer tells you that the interest rate on the commercial loan to your company could be reduced if the company were to transfer its treasury management activity to the bank or its affiliates. While discussing the establishment of a deposit account by your company with a bank, the bank’s account officer tells you that the bank will pay the company a higher interest rate on the deposit account if the company also obtains a loan from the bank or its affiliate.
The above practices are acceptable. The approval of your company’s commercial loan or deposit account is not conditional on your obtaining another product or service from the bank or an affiliate. 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 will help to explain the bundling of bank products and services.
Your company plans 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, a corporate credit card with no annual fee and a discount on foreign exchange transactions. 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.
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 other extensions of credit 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 to a bank for an operating loan for your business. To manage the risk associated with the loan, the bank requires that your business 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 PNC BANK CANADA BRANCH, our requirements for borrowers will be reasonable and consistent with our level of risk.
How Can You Contact Us?
Please let us know if you have any questions, complaints or concerns about your dealings with PNC BANK CANADA BRANCH.
Complaints regarding products and services offered by PNC BANK CANADA BRANCH can be directed in writing to:
CHIEF OPERATIONS OFFICER
PNC BANK CANADA BRANCH
SUITE 2140, 130 KING STREET WEST
TORONTO, ONTARIO, M5X 1E4.
Such complaints will be replied to in a timely manner If still not satisfied, the complainant may then contact the OMBUDSMAN FOR BANKING SERVICES AND INVESTMENTS, a third party complaints resolution organization, of which PNC BANK CANADA BRANCH is a member, in writing at the following address:
Ombudsman for Banking Services and Investments
Ombudsman for Banking Services and Investments
401 Bay Street, Suite 1505, P.O. Box 5
Toronto, Ontario M5H 2Y4
and finally a complainant may contact the Financial Consumer Agency of Canada (FCAC)
6th Floor, Enterprise Building,
427 Laurier Ave. West
Ottawa, Ontario K1R 1B9.
The FCAC will determine whether the financial institution is in compliance with federal consumer protection laws. It does not provide redress or compensation and cannot get involved in individual disputes.