Whether brokers agree with them or not, industry players in the Pacific Province are not permitted to charge cancellation fees, according to one regulator.
“Brokers cannot work a cancellation fee into the contract that stipulates the client will owe a fee if he or she chooses to not proceed with the mortgage once the broker has already started the process,” Greg Dickson of the Financial Institutions Commission in British Columbia wrote in an email to MortgageBrokerNews.ca.
According to Dickson, the Registrar of Mortgage Brokers issued a bulletin, addressed October 2015, to clarify confusion among B.C.-based brokers about any recourse they have to recoup costs associated with aborted files through cancellation fees.
“The Office of the Registrar of Mortgage Brokers is aware that some mortgage brokers are charging prohibited fees and using coercive practices to induce consumers to complete on mortgage transactions,” the bulletin states. “In some cases brokers threaten legal action to collect these fees if the consumer elects not to proceed with the transaction.”
The bulletin states the Business Practices and Consumer Protection Act prohibits brokers from charging any fees for arranging a consumer mortgage in B.C. unless those fees are deducted from the mortgage advance at time of funding.
It also suggests any brokers who charge fees for their services should seek legal advice.
Mortgage brokers have long debated the use of cancellation fees, with many arguing they help ensure they are fairly compensated for the work done prior to funding – especially when that work results in clients fleeing to another lender who offers a lower rate.
Others, however, argue they give brokers – who tout no fee services – a bad name.
According to a recent MortgageBrokerNews.ca poll, 77% of brokers refuse to charge cancellation fees.
Of those polled, 12% admitted to using them as a rule, while 11% do in certain cases.
To read the entire bulletin, click here