After years of neglecting to properly end borrowers’ mortgages, financial institutions are paying hefty sums to regulators and changing their business practices in B.C.
Since June 2023, financial institutions, including all five major banks, have paid more than $12 million to B.C.’s consumer protection regulator. The sums are for failing to provide mortgage discharge documents within 30 days of a mortgage being paid, says Tatiana Chabeaux-Smith, a representative for Consumer Protection B.C in an email to Canadian Affairs.
When a mortgage borrower pays off a mortgage, B.C. lenders are required to provide the borrower with discharge documents that release the lender’s claim on the home. These documents must be provided within 30 days for a fee of no more than $75.
These requirements were forced upon lenders in response to one of the biggest financial frauds in B.C. history — a case that revealed how a lack of strict timelines for discharging mortgages created vulnerabilities to fraud.
In 2009, Martin Wirick, a now-disbarred B.C. real estate lawyer, was found to have been funneling money given to him in trust by property buyers.
When property sellers asked Wirick why their mortgages had not been discharged, he would often blame the banks, says Ron Usher, a lawyer at The Society of Notaries Public of British Columbia.
At that time, banks were known for being slow to provide discharge documents, as there was no requirement to send them within 30 days, says Usher.
Wirick, who ultimately funneled more than $40 million into a real estate scheme, was sentenced to seven years in prison for 107 incidents of fraudulent real estate transactions.
“I do not know how many sleepless nights I have suffered and it can be said that we were strained and exhausted, physically and mentally,” said one person in a victim impact statement during Wirick’s sentencing.
According to Usher, lenders normalized their failure to provide timely discharge documents, which gave Wirick cover for his fraudulent activities.
“The bank had never gotten around to it, and were not diligent in providing the proper paperwork to take it off-title … it was just a zoo,” he said.
‘Broad non-compliance’
In 2006, B.C. amended its Business Practices and Consumer Protection Act to address these problems.
Yet for years, the Law Society of BC, The Society of Notaries Public of BC and Land Title and Survey Authority of British Columbia have warned that lenders have been breaking these rules.
Recent inspections have validated their concerns. The regulator’s inspections, which began June 2023, revealed “broad non-compliance” with the law, according to Consumer Protection B.C.
“What’s bizarre about this is that this has been the law for quite a long time,” said Usher.
Last year, Toronto-Dominion Bank paid $5.3 million, the largest payment a bank has made to the regulator, after the regulator alleged they had not provided timely mortgage discharge documents.
In an email to Canadian Affairs, TD said it has since “enhanced its processes.”
The inspections also led to the lender Fairstone Financial paying over $180,000 to the regulator in March for mortgage discharges carried out between 2018 and 2023.
“It’s a remarkable failure of customer service,” said Usher.
The Canadian Bankers Association and Royal Bank of Canada declined to comment.
Usher does not suspect the failure is a profit-motivated policy on the part of lenders. “I [would] just put it down to your typical corporate bureaucratic incompetence.”
But he says the lenders’ failure “was an enormous time waster.” Before the inspections, lawyers at The Society of Notaries Public of British Columbia spent “endless hours” dealing with expensive contractual fights, threats of litigation and follow-up to get lenders to issue discharges.
Since June 2023, 12 banks and credit unions have signed voluntary agreements with the regulator in which they promise to report the details of all their mortgage discharges for one year, to prove they are providing discharge documents on time.
While the financial sector shirked its legal responsibility for years, the recent regulatory action is changing that, says Usher.
“The lenders have become much more responsive.”
