The European Commission has branded all bundled financial products as anti-competitive and unfair. This includes mortgages or loans with life or income protection insurance, and even current accounts with travel insurance. The UK is listed as one of the countries with unfair and anti-competitive tying.
A consultation paper says some cross-selling practices, such as packaging two or more products together, are unfair because they prevent consumers being able to switch between products or make accurate price comparisons.
Bundling does not have to be an integrated product, as it includes tying where two or more products are packaged together where at least one of the products is not sold separately. Mixed bundling occurs when products are packaged but are also available separately.
The consultation paper follows an investigation commissioned by the EC of cross selling across EU member states, which found that 572 million contracts could be switched Europe-wide if such practices were not in force.
The commission says: “The results of the test suggest cases of tying practices that are anticompetitive as well as harmful to consumers and small and medium enterprises as they reduce customer mobility, price transparency and the comparability of providers on the market, increase switching costs and negatively affect consumer confidence.”
This particularly affects banks, building societies and other loan organizations where, particularly when loans and mortgages are hard to get, the customer gets pressured or feels obliged to buy life or other insurance products, for fear of being refused. Such consumers do not seek independent advice or shop around for products that are usually cheaper and/or better value or more appropriate than those pushed by the lender.