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Tied selling, more precisely coercive tied selling, is when a federally regulated bank imposes undue pressure on a customer to obtain a product or service, from the bank or an affiliate, as a condition of getting another product such as a mortgage, which section 459.1 of the Bank Act prohibits.
The Bank Act ban targets coercion specifically, not bundling itself. A bank can legally offer more favourable mortgage terms on the condition that a client also takes another product — for example, a preferred rate tied to opening a chequing account — as long as the client isn't unduly pressured or coerced into accepting it. Banks are also required to disclose the tied-selling prohibition in plain language at every branch and website where they offer products.
This matters most in the bank channel rather than on broker or monoline-only files, since brokers aren't bound by this particular Bank Act provision the same way a federally regulated bank is, though provincial regulators expect comparable fair-dealing conduct. If a client reports that a bank made another product a genuine condition of mortgage approval through undue pressure, that's a matter the FCAC can investigate.
Bank Act s.459.1: a bank cannot impose undue pressure or coercion on a person to obtain a product or service, from the bank or an affiliate, as a condition of getting another product or service.
Bundling itself is legal: a bank can lawfully offer more favourable terms conditional on also taking another product, since the prohibition targets coercion, not the bundled offer itself.
FCAC enforces compliance: the Financial Consumer Agency of Canada supervises federally regulated banks for compliance with the tied-selling prohibition and related consumer protection provisions.
Mandatory disclosure: banks must display a plain-language statement about the tied-selling prohibition at branches, on their websites, and at other points of service.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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