Tied Selling of Mortgages

Tied-Selling-of-Mortgages It’s against the law for a bank to “make you buy another product or service as a condition for obtaining a mortgage.”  That’s called tied selling.

However, it’s not a violation, according to a bank spokesman we talked with, for a bank to require you to open an account to qualify for a special mortgage discount.  Case in point is BMO’s requirement that new customers open an account to qualify for its Toronto Land Transfer Tax rebate promotion.  The bank says that’s perfectly fine from a regulatory standpoint.

  1. I would probably have to ask a lawyer for all the details of the rules but from the FCAC it states:
    ” . . . banks in Canada are not allowed to engage in ‘coercive tied selling’ or ‘forced purchases’. This means that banks are not allowed to unduly pressure or coerce you into obtaining a product or service from them or from their affiliates, as a condition for obtaining another product or service from them. This practice, called coercive tied selling, is illegal in Canada.”
    I think that spells it out clearly. You are not allowed to have the condition of one service be tied to another. They can however offer discounts, but not if the products are REQUIRED. It doesn’t specifically say BUY like they told you above, it says OBTAIN.
    What they are doing is clearly not OK.

  2. Traciatim, Without commenting on the law (because we’re not qualified to do that in this case) BMO’s claim is that linking a discount/rebate to another service is fine, and it happens all the time. If they were to make the mortgage itself conditional upon a bank account, that would be a no-no.

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