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Look Out for Signs of Fraud, Misconduct in Financial Services
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As part of Fraud Prevention Month in March, BC Financial Services Authority (“BCFSA”) wants to help you avoid fraud during some of life’s biggest financial decisions.
By searching before signing, consumers can ensure they’re working with professionals who are held accountable for following relevant codes of conduct.
Here are a few reasons to research the credentials of a professional or company in B.C. before you commit to working with them.
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Insurance fraud/misconduct
Examples of fraudulent practices or misconduct in insurance that consumers should watch for may include:
- Insurance companies and insurance agents collecting premiums for falsified policies with no intention or ability to pay claims; or
- An insurance agent or broker pocketing policyholders’ premium payments instead of sending them to the insurance company.
Before buying or renewing your insurance, check that the insurance company is authorized in B.C. on the BCFSA website: Authorized Insurance Companies Directory, and check that the insurance agent, agency, adjuster, and firm is properly licensed on the Insurance Council of BC’s website: Licensee Directory.
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Real estate fraud/misconduct
Examples of fraudulent practices or misconduct in real estate that consumers should watch for may include:
- Selling a property without the homeowner’s consent;
- Misappropriating deposits or failing to hold the deposits in trust; or
- Signing documents without authorization.
Before committing to working with a real estate licensee to buy or sell a home, it’s good practice to hold in-person meetings. Consider purchasing title insurance, which is protection against the financial consequences of a title defect in your property.
Consumers are also advised to work with a licensed real estate professional for the collection of rent and strata fees.
When working with a licensee, rents and/or strata fees are required to be placed in trust and are protected by the Real Estate Compensation Fund, whereas an unlicensed person could walk away with your rent and/or strata fees. Home buyers and sellers are also protected by the compensation fund if deposits are misappropriated or wrongfully converted.
Check out BCFSA’s real estate professional search to confirm the status of the licensee you’re working with.
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Mortgage broker fraud/misconduct
Examples of fraudulent practices or misconduct in the mortgage broker segment that consumers should watch for include:
- Falsifying documents such as bank statements, employment letters, or other income-supporting documents, to obtain mortgage financing;
- Submitting fraudulent appraisals to support an inflated sale price to the lender;
- Inflating property value to obtain a larger loan amount, usually done by manipulating the appraisal process;
- Falsely claiming that the borrower will occupy the property as their primary residence to obtain better loan terms; and
- Using a straw buyer, who has no intention of living in the property, to obtain a mortgage on behalf of the actual buyer, who may have poor credit.
Before committing to working with a mortgage broker, check if they are registered with BCFSA.
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Credit unions
Consumers should only use the services of authorized B.C. credit unions to avoid organizations that may be engaging in unlawful business.
Any credit union that claims to be in the process of applying for authorization in B.C. is also not an authorized credit union, and consumers should not use their services until they have been approved by BCFSA. With a simple search, you can find out if a credit union is regulated by BCFSA.
If it is, you’ll know that your eligible deposits are 100 per cent protected by the Credit Union Deposit Insurance Corporation of BC.
