Mortgage Broker

CmB magazine cmba-achc.ca summer 2017 | 25 cautionarycase Wrong, Wronger, Wrongest By rAy BASi, ll.B., StAFF, eDuCAtion AnD PoliCy review W rongs can trigger consequences. Serious wrongs can trigger serious consequences. Very serious wrongs can trigger very serious consequences. Dennis (Dinesh) Khanna's conduct has on a number of occasions landed him across the continuum of wrongs and consequences (though many of his wrongs are presently unproven allegations). Khanna's mortgage brokering practices got him into trouble with the Ontario Financial Services Tribunal (FST). The FST concluded that Khanna had forged and falsified documents and registered fraudulent mortgages on title; shown a flagrant predisposition for deceit and dishonesty in every aspect of his business; and preyed upon vulnerable borrowers in financial and personal distress to his own advantage. he is also facing at least four charges of sexual assault (concerning incidents alleged to have occurred at his office), one charge of extortion and one count of communicating for the purpose of sexual services. he is facing in excess of 20 fraud-related charges concerning fraud over $5,000, uttering false documents and uttering forged documents related to his mortgage brokering activities. he is now charged as well with having charged a criminal rate of interest. The FST has denied Khanna's application to obtain a mortgage brokering licence (his past licence had expired); the FST revoked the mortgage brokerage licence of his company, Metro Financial planning Ltd., saying there was clear, cogent and convincing evidence that called into question Khanna's honesty and integrity and his willingness to abide by the law. he has shown a flagrant predisposition for deceit and dishonesty in every aspect of his business. Khanna, his business and his company have been and are the subject of investigations conducted by a number of agencies, including the police's major fraud team, working in cooperation. If the remaining allegations are proven, it would appear that Khanna will have committed some very serious wrongs (both of a financial and physically violent nature) and will suffer some very serious consequences. The Khanna matter is an extreme example, but it serves as a reminder that a mortgage broker should not lose sight of his or her great power and his or her great responsibility – because, among other concerns, forgetting this simple truth can expose the broker to the great power of the authorities. in a commercial enterprise is a mortgage for commercial or business purposes not attracting the prohibition, even though the mortgage itself is residential. e challenge with consumer protection legislation is that it does not always mesh with industry practices, as with the application of the purpose test to determine the kind of mortgage transacted. e concept of legal certainty requires that citizens have some clear idea as to what is legal and what is illegal so that they can regulate their own conduct. Bill S-237 may very well fail the legal certainty test for the reasons cited above – making it a bad law. We should also keep in mind that the purpose of the Criminal Code is to prohibit criminal conduct, not to interfere with the capacity of parties to make sound contracts based on reasonable factors. It is reasonable for lenders to charge higher costs to borrowers who are higher-risk. As long as there is a commercial rationale to justify the rate and other costs, the Criminal Code has no business interfering with the transaction. It is conceivable that a high-risk borrower might very well attract an interest rate of 20, 25 or even 30 per cent once all costs and fees have been taken into account. ere are of course cases in which loan costs are exorbitant without any commercial rationale. ese loans fall within the category of extortion and racketeering, and therefore do deserve criminal sanction. e question is, where is the line between commercially justified high interest loans and extortion and racketeering? e number 20 added to the Bank of Canada rate is arbitrary. If the criminal rate of interest set in 1981 was 40 per cent above the Bank of Canada rate, we could just as easily say that the right approach is to tack on 40 per cent to the current rate of 0.5 per cent to create a criminal rate of interest of 40.5 per cent. is is also an arbitrary number, but one which is equally justified by resorting to the original 1981 criminal rate of interest rules. It also provides more wiggle room to allow for the creation of commercially justified high interest rate loans, which should never be the subject of Criminal Code provisions. However, another option would be to eliminate the criminal interest prohibition altogether. If we take a closer look (Khanna) Hamilton police Service at the case of recently suspended mortgage broker Dennis (Dinesh) Khanna, we see that his actions very much do amount to the more serious crimes of extortion and racketeering. But the crime of charging a criminal rate of interest appears merely incidental to his other crimes. e Criminal Code ought to capture only that conduct which is intuitively criminal or wrong; perhaps charging interest rates which are high but not high enough to warrant extortion and racketeering charges are not deserving of criminal prohibition and sanction. Members are welcome to offer their views on whether the proposed change is good or bad for the Canadian public by emailing CMBA at info@cmba-achc.ca. 1 http://pringuette.sencanada.ca/en/Senator-ringuette-urges- Senate-to-stop-abusive-interest-rates/ dennis (dinesh) khanna

• Cover