Mortgage Broker

38 | fall 2016 cmba-achc.ca CMB MAGAZINE The concern A lender who makes an inaccurate credit report to a reporting agency risks being liable for damages. e Alberta case of Parmar v Royal Bank of Canada, 2016 ABQB 439 illustrates this point. Although the case deals specifically with Alberta's Fair Trading Act, other provinces have similar provisions in their legislation. As well, quite apart from legislation and depending on the degree of the lack of care taken, the lender could be held liable for being negligent. What happened in the Parmar case? Parmar sued his lender bank, alleging that a bank employee was involved in mortgage fraud and the the of Parmar's identity; the identity was then used to grant a mortgage in favour of the bank. e bank sued Parmar on the mortgage, claiming he was liable under it. e two actions were consolidated. Parmar and the bank entered into a settlement agreement to settle the respective claims. e parties did not resolve liability, but each did release the other from it; the court actions were discontinued and Parmar paid the bank $10,000. Even though there was a settlement, the bank continued to show funds outstanding from Parmar under the mortgage. is was reported to two credit-reporting agencies, TransUnion Services Corporation and Equifax Canada Co. Efforts by Parmar and his lawyer to have the bank and the reporting agencies correct their reporting were not successful; the agencies continued to show a balance owing under Parmar's mortgage. Parmar claims that the inaccurate reporting made it difficult for him to obtain credit. us, he started a new action against the bank and the reporting agencies, including for the inaccurate reporting to the credit-reporting agencies. e bank acknowledged that it failed to properly report on the status of Parmar's account to both credit-reporting agencies. It pointed to systemic difficulties in dealing with such an unusual situation. While that may be a reason, it did not excuse the bank from liability. Unfortunately, the bank did not immediately correct its internal records. e bank's acknowledgement allowed the court to immediately determine the consequences. e court concluded that the bank had given false or misleading information to the reporting agencies, contrary to Alberta's Fair Trading Act. It ordered the bank to pay Parmar $5,000 for inconvenience. Parmar was unable to prove any greater damages. e reporting agencies disputed their liability. Whether they were liable would be decided at a later date aer a trial. Takeaway Lenders who report to credit-reporting agencies should take care to make accurate reports. e making of an inaccurate report could expose the lender to having to pay damages under legislative requirements and for being negligent. e Parmar case illustrates how easily the requirement to pay damages can be triggered. Legislative requirements and negligence law tend to require the wrongdoer to pay damages to the person whose credit has been negatively impacted. Where the person, unlike Parmar, can prove more substantial damages, the payment required from the lender can be correspondingly substantial. An Alberta court case highlights the need for lenders to be precise in their reporting to credit agencies BY RAY BASI, LL.B. STAFF, EDUCATION AND POLICY REVIEW Accuracy Counts

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