Prohibited Conduct Rules for Banks - What You Need to Know

The Bank Act states that a bank shall not, in its dealings in Canada with its customers or the public, take advantage of a person. "Person" includes individuals or businesses.

By listening to our customers and the public, and setting standards that govern the way we deal with our customers, employees, shareholders and others through the TD Code of Conduct and Ethics, we seek to ensure that we do not take advantage of any person. We are dedicated to operating transparently and are focused on helping people increase their financial literacy skills.

If you have any concerns, we want to hear them. Use the contact information provided below in “How Can You Contact Us?”.

What is Undue Pressure?

Undue pressure means any pressure that a reasonable person might consider excessive or persistent in the circumstances.

An example of undue pressure might include a sales representative being excessively persistent in trying to sell a product to a customer.

What is Coercion?

Coercion is where some form of threat, including a threat of physical harm, is used to try to persuade a customer to purchase a product or to take some other type of action.

A bank cannot unduly pressure or coerce you to obtain a product or service from the bank or one of its affiliates, in order for the bank to agree to provide another bank product or service to you.

The following two examples will help to explain tied selling and what is not allowed:

• Your bank's mortgage specialist tells you that you qualify for a home mortgage. However, you are also told that the bank will approve your mortgage only if you transfer your investments to the bank or its affiliates. You want the mortgage, but you do not want to move your investments.
• Your bank's customer service officer assists you with opening a chequing account, but then tells you that you must also purchase an overdraft protection plan for the account. The officer assures you that you can cancel the plan at any time, and even offers to waive the plan fees for the first few months. However, you don't foresee going into overdraft and you do not want to purchase the plan.

Both of the above practices are against the law. If you wish to obtain a product, a banking representative is not allowed to unduly pressure or coerce you to buy another unwanted product or service as a condition of obtaining the product you want.

Most businesses, including TD Bank Financial Group, look for tangible ways to show their interest in your business and appreciation for your loyalty. Sales practices, such as preferential pricing and bundling of products and services, offer potential and existing customers better prices or more favourable terms. Reasonable Credit Risk Management practices may require a borrowing customer to open an operating account. These practices should not be confused with coercive tied selling, as defined by the Bank Act. Many of these practices will be familiar to you in your dealings with other businesses.

Preferential pricing means offering customers a better price or rate on all or part of their business. For example, a shoe store offers a second pair of shoes at half price.

Similarly, a bank may be able to offer you preferential pricing - a higher interest rate on investments or a lower interest rate on loans - if you use or obtain more of its products or services. The following example will help to explain preferential pricing:

• After approving your application for a home mortgage from the bank, your bank's mortgage specialist tells you that this mortgage would be available at a lower interest rate if you transferred your investments to the bank or its affiliates.

The above practice is acceptable. The approval of your mortgage is not conditional on your taking another bank product or service. Rather, you are offered preferential pricing if you give the bank more business.

Products or services are often combined to give consumers better prices, incentives or more favourable terms. By linking or bundling their products or services, businesses are often able to offer them to you at a lower combined price than if you bought each product on its own. For example, a fast food chain advertises a meal combination that includes a hamburger, fries and a drink. The overall price is lower than if you bought the three items separately.

Similarly, banks may offer you bundled financial services or products so that you can take advantage of package prices that are less than the sum of the individual items.

The following example will help to explain the bundling of bank products and services.

• You plan to open a bank account that charges you for individual transactions. The banking representative offers you a package of services that includes a comparable bank account, a credit card with no annual fee and a discount on purchasing travelers cheques. The total price for the package is less than if you purchased each part of the package separately.

Bundling products in this way is permitted because you have the choice of buying the items individually or in a package.

To ensure the safety of their depositors, creditors and shareholders, banks must carefully manage the risk on the loans and credit cards they approve. Therefore the law allows us to impose certain requirements on borrowers as a condition for granting a loan - but only to the extent necessary for us to manage our risk.

The following example will help to explain how banks manage such risk.

• You apply for an operating loan for your business. To manage the risk associated with the loan, your bank requires your business to have an operating account with the bank as a condition for obtaining the loan.

The above example is legal and appropriate. Having your business's operating account at the bank allows your bank to assess possible risks associated with your business's cash flow and manage the risk associated with the loan.

At TD Bank Financial Group, our requirements for borrowers will be reasonable and consistent with our level of risk.

We expect all TD employees to comply with the law and not to engage in any type of prohibited conduct, including conduct that imposes undue pressure, coerces or takes advantage of another person. We provide our employees with information and training programs on acceptable sales practices. We urge you to let us know if you believe that you have experienced any misconduct in any dealings with us.

Please let us know if you have any questions, problems or concerns about your dealings with The Toronto-Dominion Bank.

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