Coercive Tied Selling

Coast Capital Savings Federal Credit Union (“Coast Capital”) is governed by the Bank Act, which requires us to inform you, in plain language, that coercive tied selling is illegal. This statement explains what coercive tied selling is, what coercive tied selling is not, and how you can contact us if you have any questions, complaints or concerns.

What IS coercive tied selling?

Coercive tied selling means being unduly pressured to buy a product or service you don’t want, from us or our affiliates, just to obtain another product or service. Specifically, Section 459.1 of the Bank Act states that it is illegal for a federal credit union to “impose undue pressure on, or coerce, a person to obtain a product or service from a particular person, including the [federal credit union] and any of its affiliates, as a condition for obtaining another product or service from the [federal credit union]”. The following examples will help to illustrate coercive tied selling and what is not allowed:

Scenario 1: A Coast Capital mortgage specialist tells you that you qualify for a home mortgage. However, you are also told that we will approve your mortgage only if you transfer your investments to Coast Capital or one of our affiliates. You want the mortgage, but you don’t want to move your investments.

Scenario 2: A Coast Capital credit officer tells you that you qualify for a Registered Retirement Savings Plan (RRSP) loan. However, you are also told that we will approve the loan only if you redeposit the money in Coast Capital’ term deposit products. You want the loan, but you want to invest the money somewhere else.

Both of these scenarios are examples of coercive tied selling, and are against the law. If you qualify for a product, a Coast Capital Savings employee is not allowed to unduly pressure you to buy another unwanted product or service as a condition for receiving the product you want.

Our commitment to you.

We expect all Coast Capital employees to comply with the law prohibiting coercive tied selling and to ensure this, we provide our employees with information and regular training on acceptable sales practices. We urge you to let us know if you believe you have experienced coercive tied selling in any dealings with us. Information regarding how to contact us can be found at the end of this statement.

What IS NOT coercive tied selling?

Certain sales practices would not fall under the Bank Act definition of coercive tied selling. For example, preferential pricing and bundling of products and services offer potential and existing members better prices or more favorable terms as a tangible way to show our interest in your business and appreciation for your loyalty. Neither of these is coercive tied selling because they give members the choice to buy the product or service on its own, or take advantage of preferential or bundling incentives.

What is preferential pricing?

Preferential pricing means offering members a better price or rate on all or part of their business with Coast Capital. You may be familiar with this if, for example, a printer offers a lower price per business card when you purchase a thousand cards instead of a hundred. Similarly, at Coast Capital, we 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 our products or services. The following examples will help to illustrate preferential pricing:

Scenario 3: After approving your application for a home mortgage from Coast Capital, your mortgage specialist tells you that this mortgage would be available at a lower interest rate if you transfer your investments to Coast Capital or one of our affiliates.

Scenario 4: After approving your application for an RRSP loan, your credit officer offers you a lower interest rate if you use the loan to deposit funds in Coast Capital’ term deposit products.

The practices illustrated above are acceptable because the approvals of your mortgage and RRSP loan are not conditional on you taking another of our products or services. Preferential pricing simply encourages you to choose to give us more of your business.

What is bundling of products and services?

Coast Capital often combines products or services to give members better prices, incentives, or more favourable terms. By linking or bundling our products or services, we are often able to offer them to you at a lower combined price, compared to buying each product on its own. A common example you may be familiar with is when a fast-food chain advertises a meal combination that includes a burger, fries, and a drink. The overall price is lower than if you bought each item separately. Similarly, we may offer bundled financial services or products so that you can take advantage of packaged prices that are less than the sum of the individual items. The following example will help to illustrate bundling of products and services:

Scenario 5: You plan to open a deposit account that charges you for individual transactions. The Coast Capital employee offers you a package of services that includes a comparable deposit account, a credit card with no annual fee, and a discount on purchasing office cheques. The total price for the package is less than if you purchased each product and service separately.

Bundling products and services in this way is permitted because you have the choice to buy the items individually or in a package.

How do we manage our credit risk?

Carefully managing the risk on the loans we approve ensures the safety of our members, depositors, and creditors.  At law, Coast Capital is allowed to impose certain requirements on borrowers as a condition for granting a loan, but only to the extent necessary to manage our risk. The following example will help to illustrate how we manage such risk:

Scenario 6: You apply for an operating loan for your business. To manage the risk associated with the loan, Coast Capital requires your business to maintain an operating account with us as a condition for obtaining the loan.

The above example is legal and necessary. Maintaining your business’ operating account with Coast Capital allows us to assess possible risks associated with your business’ cash flow, and manage the risk associate with the loan. However, our requirements for borrowers will always be reasonable and consistent with our level of risk.