Coercive tied selling (Bank Act)

A borrower may meet this term when a bank ties a loan to other products. Section 627.04 sits in Part XII.2 of the Bank Act, where an institution means a bank or an authorized foreign bank. It says the institution shall not, in its dealings in Canada with its customers and the public, impose undue pressure on a person, or coerce a person, for any purpose, including to obtain a product or service from a particular person, including the institution and any of its affiliates, as a condition for obtaining another product or service from the institution.

What the Act allows

• Section 627.05(1): for greater certainty, a bank may offer a product on more favourable terms than it otherwise would, on the condition that the person obtain another product or service from any particular person
• Section 627.05(3): if a borrower obtains a product or service from a particular person as security for the loan, the bank may require that it meet with the bank’s approval, and that approval shall not be unreasonably withheld

What to check

Section 627.04 also bars any prescribed conduct, and regulations under section 627.998 may specify conduct that is or is not coercion for paragraph 627.04(a). The Act now shows section 459.1 as repealed, so a reference to it points to an older version of the Act. Ask the lender to say in writing which products are required and which are optional, as in what a commitment letter should include. The Financial Consumer Agency of Canada Act directs the Agency to supervise financial institutions to determine whether they comply with the consumer provisions applicable to them.