Controversy among mortgage brokers in Canada after some resorted to regulatory threats to win deals

Toronto – (Canadian Press / Bloomberg)

A recent dispute among mortgage brokers in Canada has sparked widespread controversy within the sector, after one broker revealed attempts by competitors to use regulatory threats and legal wording to exclude their rivals from deals, in a practice described by observers as “illegal in the literal sense, but unethical and damaging to the profession’s reputation.”

The issue began when one brokerage office lost a mortgage deal for a client who had obtained bank approval with an interest rate of 3.94% on a fixed loan for three years. Days later, the client informed him that another broker had offered a lower rate of 3.89% — a rate that was not available at that time in the regular market for brokers.

Later, it was revealed that the competing broker lowered the apparent price by using part of his commission as an implicit support for the deal, a common practice known as buydown, but often undisclosed to the client.

Explicit threat in the name of the regulatory body

After the client canceled the initial request, the original broker received a sharply worded email demanding written confirmation of the cancellation within 48 hours, including a threat to file a complaint with the Financial Services Regulatory Authority of Ontario (FSRA) if there was no response.

According to the broker, the tone and terms used were not drafted by the client, but were directed directly by the competing broker to pressure for the file’s recovery.

A loophole in the banking system

 The problem is that some Canadian banks only allow one broker to manage the client’s file at a time, which means a new broker cannot submit a request unless the first one is canceled. Brokers say this policy, while effective in preventing duplication, is sometimes exploited for unfair competitive purposes.

Although the regulatory authority will not take disciplinary action in such cases due to the absence of a legal violation, experts believe that using regulatory threats to eliminate competition harms client trust and weakens the cohesion of the mortgage brokerage profession.

“A professional problem, not a regulatory one”

The broker who revealed the incident confirmed that he is not calling for new legislation, but urged his colleagues to raise the level of transparency and professionalism, saying:

“We cannot continue to exploit compliance language and laws as weapons against each other. If we continue, we will lose the respect that comes with professionalism.”

He added that hiding details of cashback incentives or commission reductions from clients constitutes “indirect deception,” calling for unified disclosure standards.

Calls to unify prices similar to the UK

The report pointed out that the British market does not witness such violations, because all brokers and bank branches operate according to a unified price list that does not allow competition through “pricing tricks,” but rather based on service and quality only.

Experts warn that the continuation of these practices in Canada may lead to erosion of trust among brokers themselves and weaken the sector’s image before lenders and clients, at a time when competition is increasing and regulatory pressures are mounting due to a decline in real estate market activity.