The Province of BC announced Tuesday that it is replacing the existing Mortgage Brokers Act, enacted in 1972, with new legislation that will regulate mortgage services and fight money laundering, a direct response to the Cullen Commission.
In May 2019, a Commission of Inquiry was established to examine money laundering activity in BC, such as its growth in various sectors of the economy, the effectiveness of anti-money laundering efforts, and barriers to effective enforcement of related laws. The Commissioner, Austin F. Cullen, was also asked to make recommendations to fix those problems, which were made public when the Commission's 1,831-page final report was published in June.
In a press release announcing the new legislation, the Ministry of Finance said it would be following through on several of the Cullen Commission's recommendations by:
- Establishing licensing levels and better defining mortgage services to distinguish between the regulation of mortgage lenders, mortgage brokers and principal brokers;
- Increasing financial penalties to align with the Real Estate Services Act;
- Amending appeal procedures; and
- Granting the Province’s financial services regulator, the BC Financial Services Authority, rule-making powers over licensing and licensee conduct.
"The financial services market has changed profoundly over the last 50 years," said Minister of Finance Selina 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."
The Ministry of Finance said this new legislation, which is not expected to be enacted until late-2023, was constructed in consultation with 43 stakeholders, including Mortgage Professionals Canada, the Canadian Mortgage Brokers Association BC, the British Columbia MIC Managers Association, and other groups, corporations, and individuals.
"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," the Ministry said. "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."
As is the case with the existing Mortgage Brokers Act, groups already subject to federal or provincial regulation, such as banks and credit unions, are exempt from the upcoming legislation.
Regarding fines, administrative penalties will now have a maximum fine of $100,000 and disciplinary penalties will now have a maximum fine of $500,000, up from $50,000. For individuals or corporations with a prior conviction, the maximum penalty was $200,000 under the existing act. Under the new legislation, the maximum will be $2.5M.
"British Columbians deserve better consumer protection and more transparency in the mortgage broker industry," said Robinson. "These new protections provide that peace of mind, alongside stronger protections to stop money laundering in our province."