Mortgage Broker

openbanking CMB MAGAZINE cmba-achc.ca spring 2019 | 13 If Finance Canada was to proceed with open banking, we believe it needs to review the law around data ownership with a view to resolving its legal ambiguity and, more importantly, ensure that consumers have the power to share data with service providers. Canadian laws need to be amended so that it is clear that customers and not financial institutions control and own their personal financial data. e consumer should be in control of what data is collected about them, when and how it is shared/disclosed, for what purpose the data is used, and for how long the data can be retained by the entity holding it. We recommend that the entities which hold the data should have to meet security standards for data retention and be held accountable for breaches of such standards. REGULATORY BLURRING WITH REGULATED AND UNREGULATED SERVICE PROVIDERS Opening up the financial services ecosystem to a myriad of FinTech service providers will blur the lines between regulated financial services and completely unregulated peripheral, analytical or informational support services. When regulated entities parse out bits and pieces of their financial services to third-party contractors, how will we determine whether those new financial service providers require regulation? Will third-party FinTech providers undertaking critical, outsourced functions from a regulated entity also require regulation? Compounding this problem is that service providers may operate outside of Canada's borders, making policing near impossible. We need to start our dialogue on open banking and the provision of financial services with an understanding of federal and provincial jurisdictions governing financial services and the consumer protection rationale behind that regulation. REGULATORY BLURRING OVER FEDERAL AND PROVINCIAL JURISDICTIONS – THE MORTGAGE BROKER CONTEXT Even before we discuss specific policies applicable to open banking, it is important to address the already confusing regulatory landscape in Canada within the financial services sector. Banking under the constitutional federal commerce and trade power is regulated by the Office of the Superintendent of Financial Institutions and the Financial Consumer Agency of Canada, while the provinces, under the constitutional property and civil rights power, regulate the industries and professionals engaged in finance and real estate activity, usually under provincial licensing legislation and land titles requirements. Other provincial powers such as over matters of a merely local or private nature (such as B.C. lands being mortgaged by a B.C. borrower to a B.C. lender) may come into play as well. e Supreme Court of Canada in a trilogy of cases (referred to as Marcotte) have determined that banks, while regulated federally, must also comply with provincial consumer protection legislation in certain circumstances. e Supreme Court concluded that "banks cannot avoid the application of all provincial statutes that in any way touch on their operations, including lending and currency conversion." Despite the Marcotte decisions, some banks have authorized their employees to act as financial intermediaries, such as mortgage brokers who place borrowers with third-party lenders, without obtaining any provincial licensing. Most bank customers looking for a traditional bank mortgage do not expect to encounter bank employees who will place them with third-party lenders not connected to the bank; yet such a placement is exactly what oen occurs when the bank employee is unable to qualify the client for a bank mortgage. is is oen done to the financial benefit of the bank and/or bank employee without the client's having consented to (or even been made aware of) the relationship between the third party and the bank, and the additional expense. Canadian laws need to be amended so that it is clear that customers and not financial institutions control and own their personal financial data.

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