Fed Proposes Interpretation of Anti-Tying Rules
In an attempt to not only help bankers comply with the anti-tying laws but also preempt a GAO report on the subject, the Federal Reserve Board this week issued an interpretation of the anti-tying restrictions under the Bank Holding Company Act.
The interpretation clarifies that banks can condition the availability or price of a product or service on a requirement that the customer also obtain traditional bank products like a loan or a deposit from the bank or an affiliate. The key, says the interpretation, is that the banks do not tie a given loan to the purchase of a particular product. Customers, the Fed said, should be given "a meaningful choice in determining whether to satisfy the bank's condition through the purchase of traditional bank products or non-traditional products."
In addition, the interpretation says tying restrictions apply only to the bank and not to arrangements imposed by the bank's affiliates. An insurance affiliate, for instance, could offer a discount on premiums to customers purchasing more than one type of insurance. Also, affiliates would not be prohibited from offering discounts to customers with deposits and loans at the bank. "In both of those cases, it is the affiliate (and not the bank) that has imposed the condition governing the sale of its products," the Fed wrote.
The Fed's interpretation may be an attempt to preempt a GAO report on anti-tying practices due to be released by October 6. That report was requested last August by Rep. John Dingell (D-MI), who has repeatedly accused banks of coercing customers with illegal tying practices. Coincidentally, the Fed fined a German bank $3 million this week for violating the anti-tying rules by requiring that corporate borrowers use the bank to co-manage syndicates for debt securities offerings.