The country’s largest Better Business Bureau saw the number of consumer complaints against brokers more than triple over the last three years – at the same time industry membership, in fact, dropped.
The actual numbers may be less impressive, but client beefs lodged at the BBB of Mid-Western & Central Ontario went from 0 in 2007 to 10 last year. With two months left on this year’s clock, brokers have already faced a collective nine complainants, leveling charges that run the gamut from rate misrepresentation to cancelled deals and penalty disputes. The exact resolution of those complaints is unknown.
The growth in formal complaints stands in stark contrast to falling broker membershi, which was once considered a must for mortgage professionals before Ontario moved to directly regulate their industry in 2008. Member drops largely coincide with the commencement of provincial oversight.
Again according to Mid-Western & Central Ontario data, membership numbers stood at 17 brokerages/brokers in 2010, down nearly 23 per cent from the 22 mortgage businesses on the organization's books in 2008. It has since bumped up that number to 19, a figure still representing only a fraction of Ontario’s broker membership in the 1990s.
Falling numbers or not, the Ontario BBB has had more complaints to grapple with.
“The complaints … were followed through by the BBB," Fiona Dunbar, dispute resolution supervisor. “We do on occasion refer consumers to the Financial Services Commission as well."
Provincial regulators and insurers are also dealing with a growing number of complaints against brokers as housing markets across the country cool and new mortgage rules increase the difficulty of getting some mortgage deals approved. Lawsuits around private lending deals – more often brought by investors – have also led to a spike in E&O insurance claims.
The industry saw a spate of broker suspensions and cease and desist orders this summer, with regulators showing renewed willingness to enforce both the letter and the spirit of the law. The associated consumer dispute mechanism has helped erode broker membership in BBBs across Canada, making similar services at those member-organizations redundant, argue some industry players.
But tighter regulations haven’t culled complaints.
In the province of Alberta, alone, RECA – The Real Estate Council of Alberta – censured more than 10 mortgage professionals between mid-May and mid-September, citing an array of offenses, from refusing to cooperate with an investigation to failing to comply with licensing conditions.
In the last seven months, British Columbia has doubled the number of cease and desist/suspension orders for mortgage professionals handed out last year. Regulator FICOM has also reached settlements with more than 10 brokers since last year, on disclosure, jurisdiction breaches and other key areas.
Its counterpart in Ontario, FSCO, has also issued several cease and desist orders since April of this this year.
The collective action comes as officials at the Manitoba Securities Commission blast brokerages now operating outside the province’s new licensing requirements with correspondence demanding their compliance.
“The Commission has jurisdiction under the legislation to prosecute a business or individual which conducts mortgage broker activity without being registered and will exercise this authority when required,” Ainsley Cunningham, manager of education and communications at the commission, told MortgageBrokerNews.c. “Staff are also sending letters to businesses and individuals who in the past may have been doing mortgage broker activity to make them aware of the requirement to register, and provide them with an opportunity to send in an application for registration.”
While membership in Canadian BBBs remain voluntary, some brokers remain committed to keeping that less-combative avenue of dispute resolution open to their clients. Arguably, it's also a way of keeping small beefs from escalating and eventually landing on the desk of provincial regulators.