Mortgage Broker

In thIs Issue, we take a look at the federal budget, which was tabled by Minister of Finance Bill Morneau on March 22, 2016 (see page 8), and the BC Registrar of Mortgage Brokers' consultation on compensation disclosure, which closed for comments on February 20, 2016 (see page 20). While these subjects are quite distinct, there is one point at which they potentially intersect. Minister Morneau tells us that the government intends to modernize the existing financial consumer protection framework by amending the Bank Act to include a new chapter that will provide a comprehensive set of principles, prohibitions and regulations to guide bank conduct, and replace a patchwork of rules and legislation. e budget states that amendments to the Bank Act will "reaffirm the Government's intent to have a system of exclusive rules to ensure an efficient national banking system from coast to coast." More importantly, it states the government will collaborate with the provinces and territories in the implementation of the framework. What exactly does this mean? e creation of comprehensive bank-conduct rules is in direct response to a set of Supreme Court of Canada cases, commonly referred to as the Marcotte decisions (see page 8). In the Marcotte case, 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 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." e federal government now wishes to require banks to comply only with federal and not provincial consumer protection laws. By creating a comprehensive consumer-protection framework under the Bank Act, the government can invoke the doctrine of paramountcy (a conflict between federal and provincial law, when it is not possible to comply with both sets of law at the same time as compliance with a provincial law frustrates the purpose of the federal law if challenged on constitutional grounds). So how can this impact mortgage brokers? On the subject of compensation disclosure, a comprehensive set of conduct rules for the banks could potentially include requirements for individuals within the banking system to disclose financial incentives to sell products to consumers. is would then provide the crucial level playing field with bank mortgage reps that mortgage brokers have been asking for. In the last issue of the Canadian Mortgage Broker, we commented on New Brunswick's new mortgage-broker legislation, which is intended to capture bank mortgage brokers who place borrowers with third-party lenders, which in essence means they will be licensed and regulated like all licensed mortgage brokers in New Brunswick. Precedent for provincial industry licensing of bank employees has already been set with regimes like that of mutual- fund dealers. Industry licensing regimes really are a matter of provincial purview, and cannot be readily built into a code of conduct under the Bank Act. Perhaps with the promise of a collaborative approach between the provinces and federal government, the requirement of licensing bank employees who broker mortgages under provincial laws will fit within this new banking framework. what modernizing financial consumer protection means for mortage brokers By Samantha Gale, CmBa exeCutive DireCtor CMB MAGAZINE cmba-achc.ca spring 2016 | 7 editorial summary The budget states that amendments to the Bank Act will "reaffirm the Government's intent to have a system of exclusive rules to ensure an efficient national banking system from coast to coast." adrian wyld/canadian press When federal and provincial laws collide:

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