The proposed rule change was in regards to mortgage broker compensation and client switching fees. RBC stated that while it supports the intent of the proposed rule change, it believes that it should not go into effect in its current form.
RBC expressed its concerns with the proposed rule change, which would require mortgage brokers to provide clients with fee disclosures for switching lenders or renewing existing mortgages. RBC argued that the rule would make it difficult for brokers to remain competitive compared to the banks, as they would have to include fees for their services in their mortgage quote. RBC also stated that it would be difficult for brokers to accurately calculate a fee for their services upfront, as the amount of work required to secure a mortgage or approve an application can vary greatly from case to case.
RBC also suggested that the proposed rule change could have a negative effect on the industry as a whole, as consumers may be less likely to use the services of a mortgage broker if they are required to pay a fee for switching lenders or renewing mortgages. RBC also noted that the proposed rules are contrary to the practice in several other provinces, where there is no requirement to disclose switching fees. Finally, RBC suggested that the proposed rule change could possibly lead to misinterpretation and confusion among consumers, as they may mistakenly think that their broker is charging them a fee for switching lenders.
In conclusion, RBC believes that while the proposed rule change from FICOM has good intentions, it should not go into effect in its current form. RBC suggests that rather than implementing the rule change, the focus should be on educating customers about the services provided by a mortgage broker and how they can benefit from using one. This would help to ensure that consumers are aware of the options available to them and enable the mortgage broker industry to remain competitive compared to banks.
Summary:
The Royal Bank of Canada recently released a statement in response to a proposed rule change from the Financial Institutions Commission (FICOM) which would require mortgage brokers to disclose fees for switching lenders or renewing existing mortgages. RBC noted that this could make it difficult for brokers to remain competitive compared to the banks, as they would have to include fees for their services in their mortgage quote. RBC also expressed concerns that this proposed rule could have a negative effect on the industry as a whole, as consumers may be less likely to use the services of a mortgage broker if they are required to pay a fee for switching lenders or renewing mortgages. RBC suggested that rather than implementing the rule change, the focus should be on educating customers about the services provided by a mortgage broker and how they can benefit from using one. This would help to ensure that consumers are aware of the options available to them and enable the mortgage broker industry to remain competitive compared to banks.
This article was contributed on Sep 28, 2023
