Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/407986
10 | fall 2014 mbabc.ca MortgageBroker report from the CEO to regulate them? Is the bank broker an employee of the bank who is just funnelling a declined mortgage application through private channels to make the bank a buck, or are they agents of the borrower who work as a fiduciary to find the borrower the best deal? If you read the exemption provisions of the British Columbia Mortgage Brokers Act ( MBA) carefully, you will see that it actually governs bank employees who broker third party mortgages. is may seem like an odd concept, as most bank mortgage brokers are probably completely unfamiliar with the MBA and its requirements. However, read section 11. It provides that "(1) e registration provisions of this Act do not apply to any of the following while acting as mortgage brokers or submortgage brokers under their proper names: (b) savings institutions . . ." It further states that the "e registration provisions of this Act do not apply to any of the following: (a) an employee, or director, of a person exempted from registration under subsection (1) (a) or (b) . . .." In a nutshell, the MBA only exempts bank brokers from having to register as a mortgage broker or submortgage broker. It does not exempt them from any other provisions of the MBA. is means that there are critical provisions of the MBA that bank brokers in B.C. should comply with, such as providing conflict of interest disclosure. We can address the concerns made by the CBA by asking whether these provincial consumer protection requirements unduly interfere with the federal jurisdiction over banking. Conveniently enough, the Supreme Court of Canada has just rendered a long-awaited and groundbreaking decision that provides guidance on this issue. In the case of Bank of Montreal v. Real Marcott (and two other cases), a class action suit was brought against the bank for failing to disclose exchange fees on credit cards as credit charges as required by the Quebec consumer protection legislation. e bank argued that the Canadian constitution gave the federal Parliament exclusive jurisdiction to regulate banks. However, the court decided that Quebec's consumer protection legislation is "constitutionally applicable and operative" to banks. e concept of "interjurisdictional immunity", which prevents one jurisdiction from encroaching on the laws of another, only applies if the encroaching law "seriously or significantly trammels" the core area of responsibility of the other jurisdiction. In this case, the obligation to disclose exchange costs, as required under the Quebec legislation, did not impair or prevent banks from exchanging foreign currency. e court concluded, "Requiring banks to inform customers of how their relationship will be governed or be subject to certain remedies does not limit banks' abilities to dictate the terms of that relationship or otherwise limit their activities. Similarly, even if foreign currency conversion is accepted as being part of the core of the federal banking power, imposing a broad disclosure requirement for charges relating to currency conversion in no way impairs that power." We can easily apply the principles as set out by the Supreme Court in Marcott to the case of bank brokering. Complying with the requirements of the MBA does not prevent banks from brokering mortgages. ere are not even any competing provisions of the Bank Act or regulations that govern the act of brokering mortgages. e additional criticism from the CBA that provincial consumer protection requirements imposed on banks will confuse consumers is not necessarily accurate either. is is particularly true in the case of bank brokering, as the public generally views banks as deposit takers and lenders, and not as financial intermediaries. In the case of bank brokers, the public will surely be more confused (perhaps even shocked) by the concept of bank employees acting like brokers, than the provincial regulation which may govern this scenario. Steven Gargani summed the issue up as follows: "e AMS is paid a referral fee from the secondary Lending institution and or charges a fee. at's right . . . they charge a fee!! And you guessed it, the Mortgage Rep is compensated at the end of the day based on the fees earned on the mortgage . . . Effectively, RBC is brokering mortgages without being a broker . . . Let's give credit where it's due . . . they have become a mortgage brokerage without having to follow the strict regulations and guidelines of becoming a broker." e Supreme Court has provided clear guidance on how provincial consumer protection legislation can continue to benefit the public who deal with federally regulated institutions. Let's renew our dialogue on this issue. Send your comments to editor@mbabc.ca. •