The proverbial ground is shifting beneath the feet of lenders, mortgage brokers and administrators in British Columbia with the introduction of the new Mortgage Services Act (the "MSA") by the B.C. legislature on October 4, 2022.
Expected to come into force in late 2023, the MSA replaces the current (and arguably outdated) Mortgage Brokers Act (the "MBA") by establishing a new regime that regulates many aspects of the mortgage industry in British Columbia. Enactment of the MSA is a response to long-standing concerns that the MBA has not kept pace with evolving national and international standards in consumer protection and changes in the financial services market.
While the MBA currently regulates many non-institutional mortgage lenders, the MSA will create a new licensing category of "mortgage lender" which is separate and distinct from mortgage brokers. All persons who engage in mortgage lending must be licensed under the MSA, unless they are otherwise exempted by applicable regulations or the rules. These regulations and rules are expected to be introduced in late 2023, but those engaged in mortgage lending in British Columbia should be aware of the pending changes that will take place and take the time to learn their responsibilities under the MSA.
The MSA will give the BC Financial Services Authority (the "BCFSA") the ability to develop rules for licensing and licensee conduct, which was one of the recommendations from the Cullen Commission of Inquiry into Money Laundering in British Columbia. It will require licensing with limited exemptions and provides the BCFSA with new powers to set standards of conduct and enhance disclosure and reporting obligations. The MSA will also establish different licensing levels and define "mortgage services" to distinguish between the regulation of mortgage lenders, mortgage brokerage firms and individual mortgage brokers.
Adopting the licensing and penalties framework of the Real Estate Services Act, the MSA will also provide the BCFSA with administrative, enforcement and rule-making powers over the industry, as non-traditional lenders emerge, and more British Columbians turn to mortgage brokers and online technology to arrange for their residential mortgages.
The MSA also gives the BCFSA increased powers to investigate, discipline, license and set standards of conduct and enable the BCFSA to better address emerging financial products and services in the future. Most notably, the MSA significantly increases fines for contravening the MSA, starting with a new administrative penalty of as much as $100,000. Disciplinary penalties will be increased from a maximum of $50,000 to $500,000. Individuals or corporations with more than one conviction could face a penalty of as much as $2.5 million, increased from a maximum of $200,000.
The MSA will not regulate all mortgage business activities. Entities and individuals already subject to federal or provincial regulation, such as banks and credit unions and their employees, will continue to be exempt.
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