A bank threatens to credit ration unless the customer agrees to let the bank's securities affiliate do its securities underwritings.Identify the conflict of interest in this scenario.

Question

Quizplus · Accepted Answer

The conflict of interest in this scenario is tie-ins, which occurs when a bank conditions a loan or service on the customer agreeing to purchase another product from the bank or its affiliates. In this case, the bank is threatening to restrict the customer's access to credit unless they agree to use the bank's securities affiliate for underwriting services. This is a clear example of tie-in selling, which is prohibited under the Truth in Lending Act and other federal banking regulations.

A Bank Threatens to Credit Ration Unless the Customer Agrees