The administrative penalties process under the Mortgage Service Act

Introduction

Any licensee carrying out mortgage services has obligations under the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules).

Under the MSA, the Superintendent of Mortgage Services (Superintendent) can issue administrative penalties for licensees and unlicensed persons when they fail to comply with the MSA, the Regulation, or the Rules. More information on administrative penalties can be found on BCFSA’s Mortgage Services Knowledge Base.  

Administrative penalties are often used to address minor or moderate non-compliance and are used to encourage compliance and to intervene in active non-compliance. Administrative penalties may be issued to address non-compliance for both licensed, or unlicensed, individuals or entities. The information below outlines the administrative penalty framework under the MSA and about the procedures that BCFSA has in place to issue administrative penalties.

The administrative penalty process

Notice of Administrative Penalties

Section 59 of MSA requires the Superintendent to provide notice to a person that an administrative penalty has been issued. This is called the Notice of Administrative Penalty (NOAP). The Superintendent may provide notice of more than one administrative penalty contravention in the same NOAP. The NOAP will include:

• the provisions of MSA, the Regulation, or the Rules that have been contravened 
• the penalty that has been imposed 
• brief reasons explaining the basis of the contravention and the penalty 
• information about the person’s right to be heard in the matter 

How and when a Notice of Administrative Penalty is delivered

The date an NOAP is deemed to be delivered is the earliest of the following dates:

• the date on which BCFSA personally served the person with the NOAP (MSA s. 59(3)(a) or (b)) 
• the date on which BCFSA provided substituted service by a method provided for in a court order (MSA s. 74) or 
• seven days after BCFSA provided the NOAP to Canada Post for the delivery to a licensee’s mailing address or email address (Rules s. 23 and 25). Note that this method of delivery applies only to licensed persons. 

When possible, the person will also receive a copy of the NOAP by email, if BCFSA has an email address for them. Licensees are required to provide an email address to BCFSA pursuant to section 22 [email address for licensees] of the Rules.

What happens once a NOAP has been delivered?

When a NOAP has been delivered, the subject of the NOAP has 30 days to either:

• pay the penalty or 
• submit a written request to BCFSA to request a reconsideration of the administrative penalty using the Administrative Penalty Reconsideration Request Form 

In exceptional circumstances, the Superintendent may consider extending the period for the request for reconsideration. For additional information about the process for disputing an administrative penalty, see the Reconsideration Process section below.

If the subject of the administrative penalty does not make a request for reconsideration within 30 days of the delivery of the NOAP, or a longer period allowed by the Superintendent, the subject is deemed to have acknowledged that they contravened the relevant section of MSA, the Regulation, or the Rules and the penalty is due and payable to BCFSA.

Once an administrative penalty has been imposed, the Superintendent cannot start any other proceedings under Part 3 of MSA [Discipline Proceedings and Other Regulatory Enforcement] in respect of the matter. However, if the Superintendent is satisfied that another contravention has occurred, an additional administrative penalty could be imposed, or the Superintendent can initiate a Notice of Hearing. An additional contravention can include repeat non-compliance with respect to the same provision under MSA, the Regulation, or the Rules.

Non-compliance warning letters

Generally, before imposing an administrative penalty for Category D or Category E contraventions, BCFSA will deliver a non-compliance warning letter to the subject of the investigation or examination. A non-compliance warning letter is not an NOAP.

The purpose of the non-compliance warning letter is to notify the person that the Superintendent is satisfied that a contravention of a Category D or Category E Rule has occurred, and to bring the matter to the attention of the person so that they can take steps to come into compliance.

Category E administrative penalties will be used in circumstances where a person does not respond, or does not respond appropriately, to communication or requests for information from BCFSA, or does not demonstrate a willingness to take steps to come into compliance. The non-compliance warning letter gives notice to the person that enforcement action can be taken by the Superintendent, and that regulatory action may include imposing an administrative penalty.

Timeliness of compliance and providing evidence to BCFSA of steps to come into compliance may be factors that are considered by the Superintendent in deciding whether to impose an administrative penalty or to take other enforcement action in respect of the contraventions.

After issuing a non-compliance warning letter, the Superintendent can decide whether:

• the conduct continues to be eligible to be resolved using an administrative penalty (e.g. the individual came into compliance) and to issue an AP in respect of the contravention 
• to refer the matter for enforcement action by way of a Notice of Hearing, or 
• there is new information that has changed the assessment of the matter, and the matter is more appropriately resolved through a letter of advisement, a dismissal, or the Superintendent granting an extension of the non-compliance warning period. 

Requesting an extension of the non-compliance warning period

BCFSA may grant an extension of the compliance warning period or cancel the non-compliance warning letter if the person provides BCFSA with sufficient information to satisfy BCFSA that there are extenuating circumstances.

If compliance cannot be achieved within the compliance warning period due to extenuating circumstances, a request for an extension of the compliance warning period must be made to BCFSA before the period ends. If an extension is granted, administrative penalties will not be imposed during the extension period. The length of the extension will be determined on a case-by-case basis and will consider the nature of the circumstances.

Granting an extension of the compliance warning period or cancelling the non-compliance warning letter does not prevent BCFSA from taking action in the future in respect of the matter. If the contravention continued beyond a reasonable timeframe after granting an extension of the non-compliance warning letter, and the contravention continues to be eligible for an administrative penalty, BCFSA can choose to issue an administrative penalty for the base amount.

Extenuating circumstances

Some examples of extenuating circumstances, as discussed above, include, but are not limited to:

• significant disruption to a brokerage’s computer system due to a cyber attack, a fire, or a flood 
• extraordinary work being undertaken by an external auditor 
• business disruption caused by industrial action, natural disaster, or state of emergency 
• significant illness, accident, or injury requiring hospitalization and 
• absence caused by jury duty 

Examples of situations that are unlikely to be considered as extenuating circumstances include:

• holidays or travel arrangements 
• minor illnesses  
• staff changes or absences 
• minor computer problems, partial system disruptions, or lack of contingency plans 
• office closures or statutory holidays 
• personal or domestic events such as moving or attending a wedding and 
• postal delivery delays or strikes 

Licensee must reply promptly to Superintendent

Section 24 of the Rules requires that a licensee must respond promptly to any inquiry addressed to the licensee by the Superintendent. If applicable, where the Superintendent is imposing an administrative penalty regarding information that was to be provided to BCFSA by a licensee, the Superintendent may also specify a date by which the licensee must provide additional information related to the circumstances that led to the contravention or to provide proof of compliance. The NOAP may warn a licensee that a failure to provide the requested information, or proof of compliance, by the date specified may in addition lead to the imposition of daily administrative penalties for a contravention of section 24 of the Rules.

The process for disputing an administrative penalty (reconsideration)

Individuals or entities who are subject to an administrative penalty have the right to request a reconsideration of the penalty under section 59 of MSA. Under section 2(3) of MSA, the Superintendent may delegate the authority to reconsider an administrative penalty to a Hearing Officer. A person who wishes to dispute an administrative penalty must submit a reconsideration request in writing to BCFSA within 30 days from the date that the penalty was issued. The NOAP will provide information regarding how a request for reconsideration must be submitted to BCFSA. All requests for reconsideration should be made using the Reconsideration Request Form and submitted by email to apreconsideration@bcfsa.ca.

A reconsideration request must be received by BCFSA no later than 30 days after the receipt of the NOAP or a longer period as allowed by the Hearing Officer. The reconsideration request must clearly articulate the reason for the dispute and the facts that the Hearing Officer should take into consideration as part of their review of the decision, including any extenuating circumstances that prevented compliance from occurring. A reconsideration request should address whether the person exercised due diligence (i.e. took reasonable steps or precautions) to prevent the contraventions of MSA, the Regulation, or the Rules that are at issue in the NOAP, information on any extenuating circumstances that prevented compliance, and any other information the individual believes the Hearing Officer should consider.

Before the reconsideration request is considered, BCFSA may seek clarification on any points raised in the request. The Hearing Officer will obtain all the evidence relied on by the Superintendent to issue the NOAP, including the person’s previous submissions to BCFSA. Persons may provide evidence of extenuating circumstances or due diligence for the Hearing Officer’s consideration. All evidence relevant to the contraventions should be provided to BCFSA prior to issuing the NOAP, therefore new evidence cannot be introduced later during reconsideration. Licensees have an obligation to (a) answer BCFSA’s inquiries and (b) be candid and honest. Failure to do so may result in further penalties or concerns about their suitability.

Upon receipt of a reconsideration request by the deadline, or a date set by the Hearing Officer, the officer will reconsider the administrative penalty decision. Administrative penalty decisions are made on the balance of probabilities.

Effect of the reconsideration process – all administrative penalties

As per section 59(4) of MSA, the Hearing Officer may:

• cancel the penalty 
• cancel the penalty, to be followed by the Superintendent’s issuance of a Notice of Hearing or 
• confirm the penalty specified in the NOAP, in which case the administrative penalty imposed in the NOAP will immediately become due and payable to BCFSA 

BCFSA will deliver written reasons for the disposition of the reconsideration request and, where applicable, the complainant (redacted as appropriate).

Following reconsideration, if a person seeking reconsideration demonstrates that they did not commit the contravention in the NOAP or demonstrated due diligence, the administrative penalty in respect of that contravention is cancelled. For administrative penalties imposed under Category D or Category E (daily), a decision to cancel the penalty includes the cancellation of the base penalty amount plus any daily amount.

If a decision is made that issuing a Notice of Hearing to initiate an enforcement hearing is more appropriate than imposing the administrative penalty, the administrative penalty will be cancelled, a Notice of Hearing will be issued, and the matter will proceed to a hearing. A penalty imposed at the hearing may not be greater than the administrative penalty originally imposed. BCFSA may consider additional contraventions in its Notice of Hearing and seek enforcement expenses related to the investigation and hearing process.

If a decision to impose an administrative penalty is confirmed, the amount of the penalty is immediately due and payable.

Failure to pay an administrative penalty 

There may be significant consequences for non-payment of administrative penalties that are issued by the Superintendent. Failure to pay an administrative penalty may result in further regulatory action and may impact a licensee’s suitability for licensing at the time of licence renewal.

The reconsideration process does not assess a person’s ability to pay the penalty. Its purpose is to determine if the penalty imposed has been applied correctly and in accordance with the Act, Regulation, and Rules.

Administrative penalties are debts owing to BCFSA and may be recovered as such. BCFSA may refuse to accept an application for licensing, renewal, or authorization where amounts owing to BCFSA remain unpaid. In addition, outstanding administrative penalties may be considered by the Superintendent in assessing whether an individual or entity meets applicable requirements, including those related to suitability for licensing.

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

Mortgage Services Act

s. 2 (3) [Superintendent of Mortgage Services]

s. 58 [Designated contraventions and penalty amounts]

s. 59 [Superintendent may impose administrative penalties]

s. 60 [Publication]

s. 74 [Substituted service]

MSA Rules

s. 22 [Email address for delivery]

s. 23 [Effective delivery to licensees]

s. 24 [Licensee must reply promptly to superintendent]

s. 25 [Mortgage brokerage must give immediate notice respecting insolvency]

s. 26 [Licensee must give notice of discipline, bankruptcy, criminal or other proceedings]

s. 116 [Administrative penalties]

s. 117 [Amount of administrative penalty]