People looking to get a mortgage in B.C. will soon have enhanced consumer protection under new legislation for mortgage service providers.
The Province is improving the regulation of mortgage brokers, lenders and administrators by replacing the outdated Mortgage Brokers Act with the new mortgage services act. The new act will give B.C.’s financial services sector regulator, the BC Financial Services Authority (BCFSA), the ability to develop rules for licensing and licensee conduct, which was one of the recommendations from the Commission of Inquiry into Money Laundering in B.C. It will require licensing with limited exemptions to strengthen regulatory compliance and provide BCFSA with new powers to set standards of conduct and enhance disclosure and reporting obligations.
“British Columbians deserve better consumer protection and more transparency in the mortgage broker industry,” said Selina Robinson, Minister of Finance. “These new protections provide that peace of mind, alongside stronger protections to stop money laundering in our province.”
Leveraging the licensing and penalties framework of the Real Estate Services Act, the new modern mortgage services framework is aimed at improving protection for borrowers and lenders in today’s market and allowing for changes in the future. BCFSA will now have administrative, enforcement and rule-making powers over the industry, as non-traditional lenders emerge, and more people turn to mortgage brokers and online technology to arrange residential mortgages.
In all, the act provides a framework to address a number of the Cullen Commission’s recommendations, including those aimed at reducing money laundering in the real estate sector.
“The new act will provide BCFSA with greater tools to enhance the regulation of mortgage broker services in British Columbia,” said Blair Morrison, CEO and registrar of mortgage brokers, BCFSA. “The increased powers to investigate, discipline, license and set standards of conduct will ultimately mean better protection for both borrowers and lenders as well as enabling BCFSA to better address emerging products and services in the future.”
One of the pending changes is an increase to fines for contravening the act, starting with a new administrative penalty of as much as $100,000. Disciplinary penalties will be increased from a maximum of $50,000 to $500,000. Individuals or corporations with more than one conviction could face a penalty of as much as $2.5 million, increased from a maximum of $200,000.
Members of the industry will have ample time to learn about their responsibilities under the new act. Changes will be implemented following development with the BCFSA and industry education, with the earliest timeline for the introduction of the new rules estimated for late 2023.
“We are delighted to learn that the government is adjusting the regulation of mortgage brokers to keep pace with changes in the financial services market and to address challenges that didn’t exist when the Mortgage Brokers Act was created,” said Deb White, president of the Canadian Mortgage Brokers Association – British Columbia (CMBA-BC). “We understand brokers will have opportunities to provide input into future details of the regulatory scheme. CMBA-BC and its members look forward to participating in these discussions.”
Legislation currently regulating mortgage brokers was originally enacted in 1972 to protect consumers from hidden fees and harsh mortgage transactions. Although it has been amended several times, it has not kept pace with evolving national and international standards in consumer protection and changes in the financial services market.
“The financial services market has changed profoundly over the last 50 years,” Robinson said. “We need to provide the tools to regulate the financial services industry we find ourselves in today, while guiding industry to adopt responsible business practices into the future.”
To learn more about the BC Financial Services Authority, visit: www.bcfsa.ca
To read the Cullen Commission final report, visit: https://cullencommission.ca/files/reports/CullenCommission-FinalReport-Full.pdf
A backgrounder follows.