Clear information about how you’re paid helps consumers understand the advice they receive and make informed decisions.

When compensation disclosures are incomplete, unclear or provided too late, consumers may not have the information they need; and your business may be exposed to regulatory action.

Read on to learn more about your responsibilities when disclosing compensation.

What you need to do now

  • review your disclosure forms and policies
  • update your procedures and training where needed
  • confirm your disclosures meet content, timing, and recordkeeping requirements
  • review the relevant regulation: O. Reg. 188/08, sections 21-23 and 33-35

Why clear disclosure matters

Compensation arrangements can create actual or perceived conflicts of interest. Consumers should understand the brokerage’s financial incentives connected with the recommendations they receive.

Clear, accurate and timely disclosure helps consumers assess whether a mortgage product is suitable for their needs and supports fair outcomes and confidence in the mortgage brokering sector.

What should your disclosures include?

Brokerages must disclose compensation they receive from lenders and third parties. This may include fees, commissions, incentives, and other benefits.

Each disclosure must identify who is providing the compensation and describe what the brokerage will receive. It must also explain the basis for the calculation.

In practical terms, this means including a percentage, a percentage range, or another measurable calculation method.

Simply stating that “the lender pays a commission” may not be enough. Listing factors that could affect compensation may also be insufficient. Consumers need to understand how the payment will be calculated.

For example, a brokerage could explain that it will receive remuneration calculated as a percentage of the mortgage principal. If the percentage varies, the disclosure should provide the applicable range and explain what determines the final rate. Where estimates are used, they must be flagged clearly as such in the disclosure.

Disclosures must be provided in writing and use plain language. Organize the information clearly so that consumers can easily find and understand important details.

Timing matters, too. Provide disclosures at the earliest opportunity and within the required legal timelines. Consumers must receive them before becoming obligated under a mortgage.

Finally, keep records showing when each disclosure was delivered. FSRA may review your files to confirm that you met these requirements.