Remarks by Lucie Tedesco, Commissioner, Financial Consumer Agency of Canada: National Conference of the Mortgage Professionals of Canada

October 29, 2018
Montreal, Quebec

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Good morning. I am thrilled to be here and grateful to the Mortgage Professionals of Canada for the invitation to speak to you today.

In recent months, my staff has been working to strengthen the already positive ties between our Agency, the FCAC, and your organization. We have talked and met with your President and CEO, Paul Taylor, and others, including those from your impressive education program – to discuss providing access to our consumer materials and near-term areas of focus. Your association responded with openness and a keenness to achieve our shared consumer objectives. 

Today, I thought I would talk about two of our recent industry reviews. These reviews have a direct bearing on the financial institutions FCAC regulates, and the resulting findings touch on your own responsibilities vis-à-vis your clients and their financial literacy.

In June 2017, we released a report entitled Home Equity Lines of Credit: Market Trends and Consumer Issues. It explains how banks offer HELOCs to their customers and how consumers use readvanceable mortgages. 

In 2016, of the approximate 3 million HELOC accounts held by Canadians, 80 percent were held under readvanceable mortgages. Since then, this type of mortgage has steadily increased in popularity.

When used responsibly, the HELOC portion of readvanceable mortgages provides many benefits to consumers: low interest rates, convenient access to funds and flexible repayment terms. 

However, our research found that a large number of consumers consistently make interest-only payments or sporadic principle repayments. Typically, these consumers end up carrying debt for longer periods than they had initially anticipated. They might also slip into patterns of behaviour that trap them on a treadmill of debt. 

FCAC has just completed public opinion research and, though our results have not yet been fully assessed, we have already identified a pressing need for us to help Canadians realize that not using HELOCs responsibly can have serious repercussions on their financial well-being. 

The public opinion research confirmed our initial research finding that many HELOC holders – or, more precisely, 25 percent of HELOC holders – were only paying the interest on their HELOCs most months. Interestingly, 62 percent of this group told us that they planned on paying off their HELOCs over five years. This seems overly optimistic, considering that the average HELOC balance is $70,000.  

Clearly, there is a need to strengthen the financial literacy of consumers in general and, specifically, in regard to HELOCs. Before I talk about ways our organizations can work together to address this need, I will highlight for you the results of another significant FCAC industry review, which you might find helpful as you reflect on your own sales process.  

In our recent review on bank sales practices, we noted that financial and non-financial incentives, sales targets and other elements of performance management programs may increase the risk of banks mis-selling to consumers and of not respecting their legal obligations to them. 

This consideration applies to other sales scenarios – not just those of retail banks. For example, it stands to reason that the commissions scale for mortgages could potentially lead to the sale of a products that might not be in the client’s interest. 

As business people, your success depends on earning and maintaining your clients’ trust. These are things that should not be put at risk because they are so difficult to re-establish. 

And as a key source of advice and knowledge for your clients, you should only impart to them information that is accurate and timely. 

This is where the FCAC comes in. We conduct market studies, taking deep dives into matters of wide-scale relevance to financial consumers. And, on the basis of what we learn, we produce an array of educational and informative resources and tools. 

In your own right and by way of your association with the MPC, you have a connection with the FCAC that you can depend on as you work to establish the loyalty of your clients. By strengthening their financial knowledge, skills and confidence, you are also contributing to the broader goal of financial consumer protection. 

I look forward to our continuing to work together as we have done for many years now to achieve results in the interest of the financial well-being of Canadians. 

Thank you.