In recent years, financial services regulators have begun to focus more on understanding the impact of their regulated sectors’ activities on financially vulnerable consumers. These consumers are more susceptible to harm or financial exploitation, and may be more prone to unfair treatment by their financial services providers.
In keeping with its consumer protection mandate, FSRA will target mortgage brokerages that may be dealing with financially vulnerable consumers for examination. If a brokerage is selected for review, it does not mean that it is high risk, but that it is dealing with a segment of the population that requires more protection. To help us identify these brokerages, FSRA will be collecting information on key demographic indicators of financially vulnerable consumers.
Financial vulnerability indicators
FSRA identified certain financial vulnerability indicators based on work done about vulnerable consumers by a number of Canadian and international financial services regulators1.
FSRA will begin collecting additional consumer-specific demographic information through the 2021 Annual Information Return (AIR). Care was taken to limit the questions to information that would typically be made available to mortgage brokers/agents throughout a transaction.
The information requested will help us better understand the overall level of financial vulnerability of brokerages’ consumer bases. It includes aggregate information on the following key data points:
- age (through date of birth)
- debt-to-income ratio (through TDS calculation)
- fixed (e.g., salary) or variable (e.g., commission, seasonal, business-for-self, etc.) income type
- use of specific referral sources (e.g., trustees in bankruptcy, debt collection agencies, etc.)
- use of Power of Attorney in a transaction
FSRA is committed to a collaborative process with its licensees in the mortgage brokering sector. We solicited feedback on these data points from FSRA’s Consumer Advisory Panel and Mortgage Brokering Technical Advisory Committee.
These consumer demographic data points will be collected on a “best efforts” basis for the 2021 AIR, and will become mandatory for subsequent years. This will give brokerages time to prepare collection and reporting mechanisms. In addition, this one-year transition will allow FSRA to fine-tune the data points, if necessary, and to assess the impact of such data collection on the sector.
1 Sources included: Mutual Fund Dealers Association of Canada, Canadian Securities Administrators, Authorité des marchés financiers (Québec), Financial Conduct Authority (UK), National Australia Bank, Financial Industry Regulatory Authority (US).