The Government of Canada recognizes that financial institutions have the power to exert tremendous pressure on individuals (and businesses) seeking financing.  Using this power, a financial institution could influence a consumer to purchase unwanted products or services in exchange for approval of a loan.  The practice of using direct pressure to compel a customer to purchase unwanted products or services in exchange for a loan approval is known as “Coercive Tied Selling” and is illegal in Canada.

The Department of Finance of the Government of Canada specifically defines “Coercive Tied Selling” as follows:

"A practice that imposes undue pressure, or coerces a person to obtain a product or service from a bank and any of its affiliates, as a condition for obtaining a loan or any other product from that same bank.  Section 459.1 of the Bank Act prohibits coercive tied selling and requires banks to disclose to consumers that coercive tied selling is illegal through the display of plain-language brochures made available at all of their branches."

As financial institutions become more active in selling insurance products, there is a risk that some consumers will feel compelled to purchase insurance as part of the process of obtaining approval on a loan.  Consumers should be on guard against this practice and be aware that laws are in place to make certain they are free to purchase insurance products from a supplier of their choice.

Independent Insurance Brokers in Saskatchewan believe that consumers should be free to choose when it comes to the purchase of insurance.  Freedom to choose means that consumers should have the ability, without fear of coercion, to select insurance providers that best meet their needs.