Martha Smith of First National Bank is attempting to close a large commercial loan to a manufacturing equipment company. In negotiating the interest rate on the loan Martha states that if the company will move some of its demand accounts to the bank, it could get a lower interest rate. Is this wrong?
It is not inherently wrong for Martha to suggest that the company could receive a lower interest rate if it moves some of its demand accounts to the bank, as long as this is not a mandatory condition for the loan. Tying practices, where a bank requires customers to obtain additional services to get a loan, are prohibited under the anti-tying provisions of the Bank Holding Company Act Amendments. Therefore, if moving the accounts is simply an option that could lead to a better rate and not a requirement for securing the loan, it does not violate any regulations.
Martha's statement to the manufacturing equipment company, indicating that they could receive a lower interest rate on the loan if they move some of their demand accounts to the bank, potentially violates anti-tying provisions. Tying is the practice of requiring a customer to purchase one product or service as a condition of purchasing another. It can violate antitrust laws, such as the Sherman Antitrust Act, by restricting competition.