Information on Mortgage Services Licensee Duties

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Introduction

Licensees providing mortgage services have specific duties that are set out in the Mortgage Services Act (“MSA”), Mortgage Services Regulation (“Regulation”), and Mortgage Services Rules (“Rules”). This information outlines:

1. Duties licensees owe to everyone, anytime they are providing mortgage services;  
2. Duties licensees owe to clients; 
3. Duties respecting borrowers and lenders;   
4. specific duties corresponding to different license levels; and  
5. Duties under the Business Practices and Consumer Protection Act. 

In addition to these duties, licensees must also provide certain disclosures to borrowers and lenders. More information on disclosures can be found on BCFSA’s Mortgage Services Knowledge Base. 

1. Duties Owed to Everyone

There are general overarching duties under the MSA that apply to all mortgage service licensees any time they provides mortgage services. In providing mortgage services, licensees must:

(a) act in good faith, including acting fairly and honestly;

(b) act with reasonable care and skill;

(c) avoid wrongful taking; and

(d) avoid deceptive dealing.

These duties are outlined in more detail below.

(a) Duty to Act in Good Faith

Whenever a licensee is providing mortgage services to anyone, they must act fairly, honestly, and in good faith. This means that they have to treat everyone with respect and without bias. It also means that they must provide accurate and truthful statements and not mislead or purposefully omit information that could affect a person’s decisions. And finally, it means that there is an expectation that licensees act ethically, beyond what is strictly legally required.

(b) Duty to Act with Reasonable Care and Skill

Licensees have a duty to act with reasonable care and skill when providing mortgage services. This duty highlights the expertise and competence expected of licensees.

(c) Avoid Wrongful Taking

Wrongful taking is when someone either

• takes money without permission or uses it inappropriately; or  
• intentionally does not account for or hand over money that belongs to someone else.  

Wrongful taking is a serious form of misconduct.

(d) Avoid Deceptive Dealing

Licensees providing mortgage services must not deceive others. Deceptive dealing involves:

• Intentionally misrepresenting or failing to disclose a significant fact about the mortgage services being provided. This includes misrepresentation by words, action, or in any other way.  
• Engaging in business practices meant to deceive someone about the nature of mortgage services. 
• Engaging in any behavior that could mislead or confuse someone about the mortgage services being provided. 
• Making unrealistic promises about the future that are not reasonable or made in good faith. 
• Like wrongful taking, deceptive dealing is a serious form of misconduct. 

2. Duties to Clients

The Rules set out important duties that licensees owe to their clients. The duties outlined in the Rules stem from the fiduciary duties owed to clients under common law and are fundamental to the agency relationship mortgage brokers have with their clients. More information on agency can be found on BCFSA’s Mortgage Services Knowledge Base. These duties include:

(a) acting in the client’s best interests;

(b) following the client’s lawful instructions;

(c) working within the authority given by the client;

(d) advising the client to seek independent professional advice on matters outside the licensee’s expertise;

(e) keeping the client’s information confidential;

(f) conducting due diligence and disclosing all known material information about the mortgage services and the mortgage or mortgage transaction;

(g) taking reasonable steps to avoid any conflict of interest; and

(h) if a conflict does exist, promptly and fully disclosing it to the client.

These duties are outlined in more detail below.

(a) Acting in the Client’s Best Interests

A fundamental principle of any agency relationship is that a licensee acts in the best interest of their client. This means, above all else, that licensees must put their client’s interests ahead of everyone else’s, including their own, except when explicitly required by law (such as when reporting suspicious transactions or refusing to follow a client’s unlawful instructions).

Licensees must provide their client with relevant information to help them make an informed decision, whether that decision benefits the licensee or not. At times, acting in their client’s best interest may require a licensee to refer a client to someone else for specialized expertise or to access a product that is more suitable for their needs. Acting in the client’s bests interests, and only their best interests, speaks to the professionalism expected of licensees when working with consumers.

(b) Following the Client’s Lawful Instructions

The Rules establish a basic obligation for licensees to follow the lawful instructions of their client. It is encouraged, but not required, that licensees get these instructions in writing. Any instruction that is unlawful or dictates that a licensee breach the MSA, or other legislation, must not be followed. The licensee must inform the client that their instruction is unlawful and, if the client insists on proceeding, advise them to seek independent legal advice.

(c) Working within the Authority given by the Client

Licensees must confirm that they have their client’s authorization to carry out any work they have been engaged to perform.

If a client wishes to change the scope of that authority, the licensee must first explain all associated risks so the client can make an informed decision about whether the change is in their best interest. Any service agreement or disclosure of representation must then be updated to reflect the revised authority. While changes often expand what a licensee is permitted to do on a client’s behalf, clients may also reduce that authority at any time.

(d) Advising the Client to Seek Independent Professional Advice on Matters Outside the Licensee’s Expertise

Acting in the best interest of a client requires licensees to understand the limits of their own knowledge. Where there are matters outside the licensee’s expertise, they must advise their client to seek independent professional advice. This can happen if the client needs, for example, legal advice regarding a mortgage transaction or the mortgage transaction is complex and requires specialized expertise.

If a licensee provides their client with advice that may not be accurate or complete, it can put both the licensee and their client at risk. Providing services that a licensee is not qualified to provide could rise to a level of professional misconduct under the MSA. Where a client provides instruction based on external advice, it is prudent for the licensee to request a written statement from the client to document the instructions and advice.

(e) Keeping the Client’s Information Confidential

All duties owed to clients under the MSA end with the termination of an agency relationship except for confidentiality. Licensees have an obligation to keep their client’s information confidential forever, subject to any other legal requirements.

A client can waive confidentiality when they believe sharing the information is to their benefit. This waiver should be in writing and retained in accordance with the MSA’s record keeping requirements. The waiver should include details about what information can be shared and with whom.

(f) Conducting Due Diligence and Disclosing all known Material Information about the Mortgage Services and the Mortgage or Mortgage Transaction

Licensees have a duty to conduct due diligence and disclose all known material information to their client about the mortgage services and the mortgage or mortgage transaction to which those services relate. What is considered material information will vary from one client to another. At the outset of an agency relationship, and as that relationship continues, it is important for a licensee to understand what information the client considers significant and important to protect their interests. Material information may include details obtained from a lender or circumstances that could affect the transaction. For example, this could include learning that a borrower is experiencing financial hardship or that a lender has specific conditions that may impact approval. All information known to the licensee that is material to the mortgage or transaction must be disclosed so that a client can make an informed decision that best meets their needs.

(g) Taking Reasonable Steps to Avoid any Conflict of Interest

Conflicts of interest can arise at any point in an agency relationship and may affect licensees in all areas of mortgage services. These conflicts can be actual, potential, or perceived, and may include situations such as having a personal or financial interest in a mortgage transaction. A licensee must always be mindful of conflicts that could impact a client’s interests and, where possible, take steps to avoid them.

(h) Promptly and Fully Disclosing any Conflict of Interest

If a conflict of interest does exist, whether avoidable or not, a licensee must promptly and fully disclose the conflict in writing to their client in the form approved by the Superintendent. More information on required BCFSA disclosures can be found on BCFSA’s Mortgage Services Knowledge Base.

Modification of Duties to Clients

Licensees can modify or make their duties inapplicable by agreement with the client in the following circumstances:

• When conducting dual agency in an under-served remote location; 
• When conducting dual agency for affiliates or related entities; 
• In circumstances specified by the Superintendent. 

The agreement to modify duties must be in a written service agreement. If there is no written service agreement, it must be preceded by written disclosure made in accordance with the Rules. The agreement or disclosure must clearly indicate the duties that have been modified and how they have been modified or made inapplicable.

Modifying duties does not absolve the brokerage of supervising its licensees’ conduct to ensure they fulfill all other duties owed to their client. Confidentiality must be maintained unless the client authorizes the licensee to disclose the information, or it is required by law.

3. Duties Respecting Borrowers and Lenders

Mortgage brokerages have several duties when dealing with borrowers and lenders to ensure the integrity and legality of mortgage transactions.

(a) Duty to Verify Identity

Mortgage brokerages must take reasonable steps to verify the identity of each borrower and lender to whom they intend to present a mortgage transaction for consideration. They must also verify the identity of each investor to whom they intend to present an investment in a mortgage.

If a mortgage brokerage wishes to present a mortgage transaction to a borrower or lender, it must verify the identity of each lender. If a mortgage brokerage wishes to present an investment in a mortgage to an investor, it must verify the identity of every other investor involved in the trade.

The mortgage brokerage must inform the borrower or lender if it is unable to verify the identity of another party to the mortgage transaction at the appropriate stage of the transaction:

• Before submitting the borrower’s application or renewal agreement to the lender; 
• Before the borrower enters into an agreement with the lender; 
• Before the lender enters into an agreement to buy, sell, or exchange the mortgage; or 
• Before the transaction is completed. 

(b) Duty Respecting Unlawful Transactions

Mortgage brokerages must not represent a borrower, lender, or investor if they have reason to doubt the legality of the mortgage, its renewal, or the investment. 

(c) Duty Respecting Borrower’s or Seller’s Legal Authority

Mortgage brokerages must take reasonable steps to verify a borrower’s legal authority to mortgage a property. If they have reason to doubt the borrower’s or seller’s legal authority, they must inform each prospective lender at the earliest opportunity.

(d) Duty Respecting Accuracy of Mortgage Application

If mortgage brokerages have reason to doubt the accuracy of information in a borrower’s mortgage application or supporting documents, they must inform each prospective lender at the earliest opportunity. 

(e) Duty of Continuation after Mortgage Agreement

The duty to advise a lender continues even after the borrower enters into the mortgage agreement or signs the mortgage instrument or a mortgage renewal agreement with the lender. 

(f) Duty to Avoid Dishonesty and/or Fraud

Mortgage brokerages must not act or fail to act in ways that facilitate dishonesty, fraud, crime, or illegal conduct by a borrower, lender, investor, or any other person. 

(g) Restriction on Tied Selling

Mortgage brokerages must not coerce a borrower, lender, or investor to obtain a product or service from a particular person, including the mortgage brokerage, as a condition for obtaining another service from the brokerage. 

(h) Duty Respecting Suitability of Mortgage

Mortgage brokerages must take reasonable steps to ensure that any mortgage or investment in a mortgage they present for consideration is suitable for the borrower, lender, or investor. This means the mortgage or investment must align with the needs and circumstances of the borrower, lender, or investor. More information on suitability can be found on BCFSA’s Mortgage Services Knowledge Base.

(i) Duties When Receiving Money from Lender

Mortgage brokerages must not receive money from a lender or investor, or enter into an agreement to receive money from a lender, in connection with any activity requiring a licence unless an application has been made for a mortgage on a specific property, or unless an existing mortgage is available on a specific property.

4. Responsibilities by Licence Level

Mortgage Brokerage

(a) Policies and Procedures

Mortgage brokerages must establish and implement policies and procedures to ensure compliance with the MSA, regulations, Rules, and any other applicable legislation. These policies and procedures must cover the following matters:

• Providing adequate supervision of related licensees; 
• Describing the roles and responsibilities of the brokerage to clients and unrepresented parties; 
• Verifying the identity of borrowers, lenders, and investors; 
• Determining the suitability of a mortgage or investment for borrowers and lenders; 
• Identifying and disclosing material risks of a mortgage or investment for borrowers and lenders; 
• Identifying and disclosing conflicts of interest or potential conflicts of interest between the brokerage (or any of its related licensees) and clients represented by the brokerage; 
• Providing incentives, other than money, for dealing in or trading in mortgages to related licensees by other persons and entities, if the brokerage permits any of its related licensees to receive such incentives; 
• Monitoring non-monetary incentives received or given by related licensees; 
• Preventing fraud, dishonesty, and unlawful interactions, ensuring compliance with the MSA and its regulations; 
• Maintaining and retaining records, including ensuring compliance with record-keeping requirements under the MSA, Rules, and Regulation; and  
• Verifying a lender’s or investor’s status as a permitted person. 

These policies and procedures must be reviewed and updated regularly, at least once a year, and whenever there is a significant breach. Each review must be documented and retained in accordance with the Rules.

(b.1) Duty to Maintain Proper Records

Licensees must maintain proper books, accounts, and other records. All records maintained by a mortgage brokerage must be kept in British Columbia. They must also protect all records and personal information they encounter while providing mortgage services and make reasonable security arrangements against all risks of loss, destruction, and unauthorized access, use, or disclosure.

Licensees must immediately tell BCFSA if they think:

• They have lost custody or control of any records related to providing mortgage services,  
• Someone has accessed or copied any of their records without permission, or  
• Someone did not fully and permanently destroy records as instructed.  

More information on record keeping requirements can be found on BCFSA’s Mortgage Services Knowledge Base.

(b.2) Security of Records

Licensees must protect all records obtained while providing mortgage services and the information contained in those records. They do this by making reasonable security arrangements against all risks of loss, destruction, and unauthorized access, use, or disclosure. Licensees must immediately notify the Superintendent in writing if they have reason to believe that:

• they have lost custody or control of any records obtained while providing mortgage services; 
• any person has improperly accessed or copied any of their records; or 
• a person has failed to completely and permanently destroy records despite instructions to do so. 

(c) Duties When Maintaining a Trust Account

To maintain a trust account, a brokerage must be authorized by the Superintendent of Mortgage Services (“Superintendent”). These duties are only applicable to those licensees who have received authorization.

When a brokerage receives money that belongs to someone else, they are holding it in trust for that person. Any money received in trust must be put in a trust account promptly but no more than 2 business days after the date of receipt.

If a brokerage is authorized to maintain a trust account, they must:

• Maintain an interest-bearing trust account with a savings institution in British Columbia;  
• Maintain this trust account in accordance with the Rules; and 
• Designate it as a trust account in both the licensee’s and the bank’s records.  

More information on trust account requirements can be found on BCFSA’s Mortgage Services Knowledge Base.

Principal Broker

(a) Management of Mortgage Brokerage

Principal brokers must be actively involved in managing their related mortgage brokerage.

(b) Adequate Supervision

Principal brokers must ensure there is adequate supervision for related mortgage brokers, employees, and others performing duties on behalf of the mortgage brokerage.

(c) Competency

Principal brokers must ensure that the mortgage brokerage’s business is conducted competently and in accordance with the MSA, regulations, Rules, and any other applicable legislation.

(d) Compliance with the MSA, Regulation, or Rules

Principal brokers must ensure that their mortgage brokerage follows all requirements as provided in the MSA, Regulation, and Rules. They should not do anything, or fail to do something, that could cause the brokerage to break these rules.

(e) Reporting of Misconduct

When principal brokers become aware of any behavior that might be considered professional misconduct or conduct unbecoming of a licensee, they must promptly notify the Superintendent. They must also take reasonable steps to address any issues, including reporting any improper or negligent behavior related to mortgage services by a licensee, an unlicensed employee, or anyone else associated with the mortgage brokerage, as well as their own improper conduct.

(f) Records

Principal brokers must ensure that all records of the mortgage brokerage are kept according to the MSA and Regulation. They must also properly manage and control all documents and records related to MSA requirements. More information on record keeping requirements can be found on BCFSA’s Mortgage Services Knowledge Base.

(g) Trust Accounts

To maintain a trust account, a brokerage must be authorized by the Superintendent. Principal brokers must ensure that any trust accounts of the mortgage brokerage are maintained in accordance with the MSA, Regulation, and Rules.

Mortgage Broker

(a) Representation

Under the MSA, a “client” is the person who has engaged the licensee to provide dealing, trading, or administering mortgage services. Mortgage brokers representing clients owe certain legal duties to them, including always acting in the client’s best interests; sharing all information that might affect the client’s decisions; avoiding conflicts of interest, and disclosing any if unavoidable; and keeping the client’s information confidential, even after the client relationship ends.

(b) Compliance

Mortgage brokers must not do or omit to do anything that might reasonably be expected to result in their mortgage brokerage contravening or failing to comply with the MSA, Regulations, or Rules.

(c) Duty to Report Misconduct

Mortgage brokers must promptly notify their principal broker upon learning of any conduct that may be considered misconduct. This includes their own conduct, the conduct of an employee or another person performing duties on their behalf, or the conduct of any other person. If a mortgage broker learns that a principal broker has committed misconduct, they must promptly notify the Superintendent.

(d) Records

Mortgage brokers must promptly provide their principal broker with the original or a copy of all records required under the MSA, Rules, and Regulation. These records must be in the possession of the mortgage broker and prepared by or on behalf of the mortgage broker; or received from or on behalf of a Principal Broker. More information on record keeping requirements can be found on BCFSA’s Mortgage Services Knowledge Base.

(e) Communicating with Principal Broker

Mortgage brokers must keep their principal broker informed of the mortgage services they are providing and other activities they are performing on behalf of the mortgage brokerage. They must promptly respond to any inquiry addressed to them by the principal broker.

(f) Supervision

Mortgage brokers must ensure there is an adequate level of supervision for their employees and others performing duties on their behalf. More information on unlicensed assistants can be found on BCFSA’s Mortgage Services Knowledge Base.

5. Duties under the Business Practices and Consumer Protection Act

When providing mortgage services, a licensee must comply with the following provisions of the Business Practices and Consumer Protection Act:

(a) Deceptive Acts or Practices (Sections 4 to 6)

These sections prohibit deceptive acts or practices in consumer transactions and provide remedies for affected consumers.

(b) Unconscionable Acts or Practices (Sections 7 to 10)

These sections prohibit unconscionable acts or practices in consumer transactions and provide remedies for affected consumers.

(c) Advertising (Sections 59, 60, 62, 64)

These sections prohibit false or misleading advertising and provide remedies for affected consumers.

(d) Disclosure Requirements (Sections 66, 67)

These sections require disclosure of all material facts in credit agreements.

(f) Rights and Obligations (Sections 71 to 73, 75, 76)

These sections outline the rights of borrowers and the obligations of credit grantors in credit transactions.

(g) Credit Arranged by Loan Brokers (Sections 79, 80)

These sections require loan brokers to disclose their fees and charges and prohibit excessive fees.

(h) Disclosure for Fixed Credit (Sections 83 to 89)

These sections require disclosure of all material facts in fixed credit agreements and provide remedies for affected consumers.

(i) Disclosure for Open Credit (Sections 91 to 93)

These sections require disclosure of all material facts in open credit agreements and provide remedies for affected consumers. (General Provisions (Sections 104, 105)

These sections outline the general duties of credit grantors and provide remedies for affected consumers.

Applicable Section of Mortgage Services Act, its Regulations, or the Mortgage Services Rules

MSA

s.31 [Duty to act in good faith]

s. 32 [Records]

s. 33 [Trust accounts]

s. 34 [Wrongful taking]

s. 35 [Deceptive dealing]

MSA Rules

Part 3 – Licensee Standards of Conduct

• Division 1 – General Responsibilities and Duties of Licensees  
• Division 2 – Duties to Clients  
• Division 3 – Duties Respecting Borrowers and Lenders