Orders of the Day

Hon. M. Farnworth: I call second reading, Bill 30, Cannabis Control and Licensing Act.

[2:45 p.m.]

[S. Chandra Herbert in the chair.]

Second Reading of Bills

BILL 30 — CANNABIS CONTROL AND
LICENSING AMENDMENT ACT, 2022

Hon. M. Farnworth: I move that Bill 30 now be read a second time.

It’s my pleasure to rise today to speak about Bill 30, the Cannabis Control and Licensing Amendment Act, 2022.

In the four years since cannabis was legalized, we’ve seen the growth of a new legal industry that pays their taxes, contributes to their communities and complies with strict public health and safety rules. Most B.C. cannabis consumers now buy legal cannabis from one of over 450 regulated stores, and sales topped $500 million in 2021. B.C. produces some of the best cannabis in the world, and the value of legal cannabis to B.C.’s GDP surpassed $1 billion in 2021.

Legalization is a process; it is not an event. At the time of legalization, B.C. was at the centre of Canada’s illicit cannabis market. The shift from illicit to legal sales was not going to happen overnight. Our current estimate is that just under half the value of all cannabis consumed in B.C. is produced and sold illicitly. Illicit sellers do not abide by the strict federal and provincial laws that aim to protect minors and promote public health and safety, and illicit cannabis continues to be a profitable business for organized crime.

The community safety unit, or CSU, is the primary enforcement unit for illicit cannabis sales in the province. They work closely with police but primarily rely on seizures and monetary penalties. CSU represents a made-in-B.C. approach to illicit cannabis sales that aims to reduce pressure on the criminal justice system through progressive enforcement and non-criminal sanctions, the administrative penalties.

CSU was initially designed when illicit brick-and-mortar stores were top of mind. After successfully closing the vast majority of those stores, we’ve seen the remaining illicit operators pivot into the online space to evade enforcement.

These amendments will improve CSU’s ability to target illicit online stores and production sites by clarifying and, in some places, expanding CSU inspection and seizure authorities. They will also improve CSU’s ability to track online illicit cannabis back to its source by authorizing the director of the CSU, the community safety unit, to be able to purchase illicit cannabis that is online.

[2:50 p.m.]

Other amendments will clarify the role of the director around administrative hearings — for example, clarifying that the director is not the appropriate decision-maker to consider constitutional arguments, which is the proper role of the courts.

Before I close, I want to add some further comments. We know that there are…. I said at the beginning of my remarks that the legalization of cannabis is not an event. It is an ongoing process.

I believe this legislation — coupled with the significant changes we have made, in consultation with the cannabis industry, around issues such as direct delivery, being able to order online and the developments which we’re taking in terms of going to Farmgate — is going to expand the opportunities, along with the section 119 agreements that we have been putting in place, which are now being championed by many First Nations, First Nations who have been reluctant to enter that legal market.

It’s starting to show a path that will ensure that we continue to expand the legal market, that we are able to take the enforcement necessary on the illegal market, that we are keeping up with the changes that we see happening as regulations change. The online issue is particularly important. These tools, given to the community safety unit, are going to enable them to continue to not only do the work that they have currently been doing but to be able to expand to those areas where we are still seeing illicit cannabis sales.

At the same time, this is the provincial responsibility. We are also working at the federal level to deal with some of the bigger challenges that we face in terms of the medical licensing regime and the ability of Health Canada, in terms of the regulatory framework which they operate under, which can be challenging, for producers who want to enter that legal market, to be able to get into.

We also want to ensure that they understand…. One of the key components, in terms of enforcement, is also on the inspection side, on the medical health side of cannabis. So when someone has a licence to grow 20 plants, that is all they are growing: 20 plants. Right now there is very little enforcement or inspection done by Health Canada. That is something that we will continue to push them on, to change that, to ensure that that is taking place, because that is one of the biggest sources, still, of illegal cannabis.

All of these things — these initiatives with this legislation before us today, the work that has been done already today, working with that industry — are going to continue to ensure that we can continue to grow the legal cannabis market in this province. So if we are around 50 percent, with a value to our provincial GDP of $1 billion and over $500 million in sales, we are able to grow that.

That benefits not just the province and the provincial treasury but also ensures that consumers are buying their cannabis from a legal, safe, tested store that they have confidence in. We know that that is working. We know that the majority of people now do buy their cannabis from a legal store.

There will be more discussion, obviously, on the different sections of this bill. That will take place in committee stage. I look forward to the discussion around these changes, many of which have been developed in consultation with the industry itself, that respond to the industry, to things that they have been asking for. We will continue on that path.

I know that there will be a number of members from both sides of the House who will have an important contribution to make on the second reading debate of this bill. I look forward to that.

With that, I will take my place.

[2:55 p.m.]

M. Morris: This is a transition period. It’s new legislation. The legalization of cannabis is something new for all of Canada, but what’s not new in British Columbia is the involvement of organized crime in cannabis and the illegal production of cannabis.

I understand…. In going through this particular bill, I see the necessity for a lot of the amendments that are being put forward here. We have to modernize. We have to keep up with online sales, the use of electronic devices. There are a number of things, which I’m very happy to see in here, that will give the community safety unit the necessary tools to conduct searches, inspections and whatnot throughout the program.

What appears to be missing from this, in my view…. We’ll examine it more during the committee stage of this.

We’ve had a number of illegal retail sales outlets proliferate in some of our more vulnerable communities around the province. Some are growing their own product. As the minister alluded to, there are some significant health concerns with a lot of the cannabis that is grown illegally. I think that needs to be held foremost in our minds here. Are we jeopardizing the health and safety of British Columbians who are buying the illegally produced cannabis from these illegal retail outlets? We’re going to be examining that in a little bit more detail as we move forward.

There’s a curiosity in this bill put forward here, where it is outlining, legislatively, that the director has no authority to address constitutional questions that are presented during the administrative process of this particular bill — when he’s administering penalties, for an example. That’s the case with a lot of different tribunals that we see within the province.

This legislation, initially, was mirroring the Liquor Control and Licensing Act legislation as a basis for its development. I see this as…. This is new. This is unique in this particular legislation. During the committee stage, I’d like to pop the hood open on this particular issue, as well, to find out why this is.

I know there are a number of avenues available to the government, the community safety unit and the director. If there’s a constitutional question that arises, there’s already legislation in place that allows government to go to court and get an opinion on whatever that question might be that arises. Or they can proceed by way of court proceedings, criminally instead of administratively, through here, and have the situation aired in court. So I’m a little curious as to why this particular section was put in here.

We have a duty, government has a duty, to ensure the safety of British Columbians. That’s paramount, the health and safety of British Columbians.

I think the other duty, which seems to be missed, in large part, by this government, is…. When it comes to respecting the rigour that they built into this statute, that legitimate retailers have to go through in order to be licensed and the cost that these legitimate retailers have to endure in order to obtain a licence from the government to sell legally produced cannabis in British Columbia….

It must be a devastating blow to them to see the number of illegal retail cannabis sales outlets proliferating through different parts of the country, of the province, in some of our more vulnerable communities, within metres of a legitimate retail outlet that has gone through the rigours necessary in order to be licensed, and the money that they must be losing in order to compete with the illegal sales that we have. This government seems to be doing nothing about it.

There are examples. There’s statistical data available about the community safety unit and the number of administrative penalties they have assessed. So far, it’s in the millions of dollars. They’ve collected but a fraction of that, I understand.

That’s the low-hanging fruit. They drive by dozens of illegal retail outlets in the process of going to one that might present less of a challenge in administering the administrative penalties or prosecuting those particular ones. I think that’s wrong. I think they should be looking at all of them with the same vigour and interest that they do.

[3:00 p.m.]

A lot of these communities that do have these illegal retail outlets are extremely vulnerable to the impacts of organized crime infiltrating these communities — I’ve seen it in my service as a police officer, and we’ve seen it happen in other provinces across Canada — to the point where organized crime will have such an impact on those communities that the quality of life goes down in those communities, and the safety of the individuals in those communities is impacted by having organized crime in such close proximity to the men and women that live in those communities.

There’s a number of things in this. It’s a short bill, basically. It’s not too long. There are a number of things in this bill that do make a lot of sense, but I think that during the committee stage we’ll have a chance to examine some of those clauses in this bill that raise other questions. I want to find out what’s going on behind the scenes. I want to find out whether this bill is providing the tools necessary for a fully funded and fully staffed community safety unit to do what is necessary to keep British Columbians safe throughout the province here.

I’m going to keep my comments to that. We will dive into it a little bit more during the committee stage, but I will let some of my other colleagues speak on this matter as well.

H. Yao: It’s nice to actually be able to speak again, right after the summer break. I’m privileged to be able to stand up and speak about the Cannabis Control and Licensing Act. I’m just sitting here listening to the opposition bring up a lot of interesting points. That’s what creates a considerable amount of reassurance for me.

This act is designed to help our legal businesses to be able to protect their profits, to protect their activities, to protect the rigorous efforts they’ve put into getting the proper licence through Health Canada to ensure that they are able to operate properly and that we combat against illegal activities.

I want to take a few steps back first. As we know, B.C. has quite a history when it comes to illegal cannabis, and when the federal government decided to legalize cannabis, our government, obviously, in going through this process, tried to ensure that we’d go through the legalization process to ensure greater protection. It’s not just simply for the businesses that are running cannabis stores. We are also talking about different protections for children — for youth — to make sure that product safety is established in there.

I think this is a really great reflection that after the last few years, our government has realized that on certain aspects, we need to step up. For example, as our Minister of Public Safety and Solicitor General mentioned earlier, very clearly, online sales have become a huge issue. We understand the realities today, what with the modernized technology and with a lot of opportunities.

If we don’t step up with our enforcement strategy, illegal cannabis will find a way to slip through our system, not just selling at an undercut profit and undermining all the requirements and rigorous demands upon typical small and medium-sized businesses in B.C. but also placing our youth and children in vulnerable circumstances when they are able to sell items to people that shouldn’t have access to it.

Taking a look at this legislation, I’m encouraged by our government’s steps forward to really ask ourselves how we can further strengthen our determination to create a fair, just and safe environment for British Columbians. When people have chosen to utilize cannabis for recreational purposes, they don’t get it from a store that is being licensed, and we know those stores. They go through a rigorous system. We’re talking about facility upgrades. We’re talking about recordkeeping methods. We’re talking about process, security clearance checks.

We’re talking about physical security to ensure that whatever they produce, whatever they sell, whatever they distribute in our community is in proper compliance with government and with protection and safety of our children and families. Unfortunately, illegal cannabis activities undermine that.

I want to thank the opposition member for bringing up, so many times, how illegal cannabis is creating problems, not just for our province, not just for our families, but also for our youth and children and, of course, legal businesses who went through such a rigorous, determined and committed effort to ensure that whatever it produces, whatever it delivers, is in compliance.

I’m so excited that our Minister of Public Safety and Solicitor General has introduced this bill for our government, to ensure we can find all kinds of ways to empower our community safety units to ensure that they are able to purchase online products and to examine them to ensure that they are properly in compliance, to support community.

[3:05 p.m.]

Of course, we’re talking more now about the criminal component. I appreciate that there’s much more work to do — and our government is determined to do more to bring safety and security, not just for British Columbians but also for our small businesses — but this is really more focused on how we can undermine, actually reduce and, hopefully, eliminate illegal cannabis sales in our province.

I also want to take a little bit more focus on…. We’re talking about different businesses, and we’re really trying to find ways to ensure that youth and children are safe. When we actually follow the compliance and legalization process, it gives government greater opportunities to step in to address challenges that often put our safety into question. Of course, we worry about gang activities. We worry about illegal criminal activities. We worry about illegal profits that end up benefiting criminal activity instead of the provincial government’s GDP, instead of benefiting those community services that can be funded by our provincial government.

I’m so glad that we’re working together to continue to find a way to really come together and combat against illegal cannabis and to ensure our provincial government’s community safety units can work together to reduce illegal activities with cannabis and to continue to find ways to support small businesses, support families, support communities and really return those profits back to our province, to really find ways to strengthen our community services and sense of safety, and to strengthen British Columbia’s prosperity.

I don’t have much more to say, so I thank you for the opportunity to speak, Mr. Speaker.

G. Kyllo: It certainly gives me great pride to rise in the House today and to speak to the amendments coming forward on Bill 30. As my colleague the member for Prince George–Mackenzie has indicated, the cannabis legislation is relatively new — I think we’re about three years in — so we certainly appreciate the need to continue to update and to amend the legislation as we see the cannabis sales moving more to an online environment.

We certainly welcome those additions that give additional strength and opportunity for the community safety unit, the CSU, to actually investigate and crack down on the sale of illegal cannabis throughout the province. The challenge is that, largely, we have seen a proliferation, an increase, in the number of unlicensed, illegal cannabis retail operations throughout British Columbia.

In my riding of Shuswap, a small riding with only about 59,000 constituents, there are over 24 unlicensed retail cannabis sales shops — 24 in the Shuswap riding alone. That’s only one of 87 ridings in the province. The challenge is: where are these operations getting their drugs from? Where’s the cannabis coming from?

They’re unlicensed. They don’t have the ability of purchasing cannabis from the licensed producers that are under federal legislation. They’re buying their product from organized crime. We’re seeing organized crime in the communities around the province — a proliferation throughout the Shuswap — where organized crime are now embedding themselves in these communities and actually selling illicit product to these unlicensed stores.

Now, the Solicitor General mentioned how important this is and is quite proud of the fact that, as he’s indicating, 50 percent of cannabis sales in the province are now through licensed stores. That’s a significant number of stores set up that are unlicensed. They have no insurance, no security cameras, many of them. Nobody is monitoring. The community safety unit is not paying any attention. I drive by these stores, and I see young kids, well under the age of 19, standing outside smoking marijuana, and nobody is paying attention.

You approach the RCMP, and they point to the provincial government. The provincial government are the ones that have the responsibility, through the community safety unit. When you call the community safety unit: crickets, absolute crickets. You call them and ask them to actually investigate; nothing happens.

The worst part is that the government, the Solicitor General, last year came out with a report that indicated that a lot of the illicit cannabis product that they actually have confiscated and they have found is contaminated. There are carcinogens in it. Many producers put a product into the soil which actually adds weight to the product, and it’s carcinogenic.

[3:10 p.m.]

Fair enough. The Solicitor General today references that maybe Health Canada should do something about it. Well, I don’t think it’s Health Canada’s responsibility to actually investigate and sample illegal, illicit product that’s being sold across B.C.

This government is doing nothing. These stores are not just selling cannabis. Heroin, cocaine, MDMA — all these products are being sold in these unlicensed stores throughout British Columbia with reckless abandon. For the minister to stand up today and introduce a new bill that, from what we can see, actually takes away responsibility of this government…. There’s a specific clause that talks about jurisdiction. The particular clause establishes that the director does not have the jurisdiction over constitutional questions when considering whether to impose a monetary penalty or consider a compliance order. This is a copout.

This is an opportunity for this government, through this particular clause, from my understanding of it at this initial reading, to actually choose, for any unlicensed stores, if there’s any kind of a constitutional question: “Not for us. We don’t have to worry about it.”

Well, I’ll tell you what: crime is up. Overdose deaths are up. Nobody starts using drugs with the intention of becoming an addict. But when you have unlicensed stores that are selling to youth, that are selling not just cannabis products…. They’re selling heroin, cocaine, MDMA. You name it; you can get it at these unlicensed stores. The CSU is standing by and ignoring it, and this government is doing the same.

The soft-on-crime agenda and the catch and release are all coming to fruition, and we’re going to see absolute chaos in this province. I certainly welcome any initiatives that this government undertakes to pay attention and to give themselves additional investigative powers to actually do something, but the reality is that on the ground, the problem is getting worse, not better.

A. Singh: Right away, I’m going to address something here. Licensed stores selling heroin? First time I’m ever hearing about this. If you have actual evidence of that, we would love to see that. Heroin in stores — it’s the first I’ve ever heard of it.

I regularly attend Alcoholics Anonymous meetings. I’ve been very open about that. There are lots and lots of people who use other substances or were using other substances and are recovering from that. I have a fair amount of knowledge on the subject of where those things are obtained. I have never, ever come across someone who’s ever spoken about a heroin store.

Anyway, I will leave it at that. Please bring us some evidence. We would love to see that, and we will refer that on to the CSU and get them to enforce the law as it is. Conjecture statements like that do not help the situation. This Cannabis Control and Licensing Act — I’m in full support of it — is a phenomenal piece of legislation to address that.

You know Al Capone? Everybody’s heard of Al Capone, right? Kingpins like Al Capone were able to rake in hundreds of millions, of today’s dollar amounts in those days. At the turn of the century, the term “organized crime” did not exist until Prohibition. This is just a bit of background on what’s happening. Once prohibition came in, you saw gangsters getting together.

Gangsters used to actually be employed by political bosses. This is maybe a small history lesson on our — well, more the U.S.’s — system. Politicians used to be sort of gangsters themselves, and they would employ these gangsters to do things for them. When Prohibition came about, those gangsters on the street saw that as a great business opportunity, and hence we have the Mafia and gangs like Al Capone’s.

[3:15 p.m.]

“Organized crime — what does that have to do with this?” you ask. Well, this is exactly what this bill is trying to address. Before cannabis was legalized, illicit gangs made a lot of money through the sale of cannabis and other substances. Unfortunately, with the federal legalization of cannabis, with the whole regime that has been set up and with the stores that we have, those illicit sales haven’t gone away. That organized crime part of it still hasn’t gone away.

This legislation is part of the part of the solution to that. It’s part of the solution to addressing that. This is really important, because not only does that organized crime part of it benefit from the sale of illicit cannabis, but it’s the same milieu of people that also puts poisonous drugs into our system. It’s the same people who are responsible for the opioid crisis that we’re in right now.

So not only does this address some holes, some gaps in the administrative system right now, but it will hopefully help…. If you get rid of those gangs, you get rid of all of these problems. You really are a step forward there. The Cannabis Control and Licensing Act includes an extensive compliance and enforcement regime. A key component of this regime is, as people have spoken of before, the CSU, the community safety unit, which is the authority that looks at compliance and enforcement with respect to unlicensed sales.

Amendments to the CCLA — we will abbreviate and call it that — will strengthen this enforcement against illicit cannabis operations. These amendments that we’re going to pass — they will be passed — ensure that the CSU has the necessary authority to conduct enforcement against illicit online businesses. Especially with COVID, we saw that. We saw a shift from bricks and mortar onto online, not only in legitimate businesses but also in illicit businesses. It will also clarify the processes for administrative hearings regarding cannabis enforcement.

These amendments are another way that we are cracking down on illicit cannabis operations and ensuring that British Columbians who choose to consume cannabis products can buy safe, legal products. Again, one of the benefits of that is you get rid of the money that gangs are making from illicit cannabis. You’re breaking into their profit margin. You’re making it less profitable for them. It will also have an effect on the opioid crisis as well.

The proposed amendments, as I’ve spoken, will streamline administrative hearings for cannabis enforcement and ensure that the CSU has the necessary authority to conduct enforcement against illicit online businesses. What is the CSU, you ask? The CSU became operational in April of 2019 and operates with investigations created through a variety of reactive and proactive strategies, with complaints being received from the public, from store owners, from me and you, from government agencies, police — again, legal market operators and others.

B.C. is the only province in Canada to establish an enforcement unit to enforce cannabis legalization and to deal with illegal retail sales. Pre-legalization, British Columbia was the centre of Canada’s illicit cannabis market. We all knew that the transition to a legal industry would be challenging, given that history. We all knew that. For generations, B.C. has been the centre of that. B.C. now has a comprehensive compliance and enforcement regime, with the CSU playing a complete, central role in this.

The CSU’s approach to enforcement activities is focused on non-criminal sanctions, through administrative monetary penalties. Again, hit them in the pocket; hit them where it hurts. The unit is continuing to make significant progress in disrupting illicit market supply and sales channels. The CSU reviews each complaint, and it’ll follow up with investigations as required. CSU officers are actively following up with unlicensed retailers, in communities across B.C., as we speak now.

All along, though the aim of our whole scheme was originally voluntary compliance, we’ve been very clear that once legal cannabis retail outlets became operational in a community, the illegal retailers would face enforcement activities from the CSU. This is just another way that we’re protecting cannabis consumers and those retailers who are doing the right thing and have obtained their licences in the proper manner. This will also ensure that our public is buying safe, tested products from a legal source.

[3:20 p.m.]

A key aspect of our cannabis strategy is to eliminate the illicit market and to keep profits out of the hands of organized crime. Many reasons for that, of course. The CSU is a regulatory enforcement unit that has enforcement authority over all illicit cannabis operations.

When dealing with illegal growing operations, especially where criminal gang elements are involved, the Combined Forces Special Enforcement Unit B.C., with the CSU, provides provincewide coordination for organized crime and gang prevention and disruption and also conducts operations, in many jurisdictions, that have a positive impact on the Lower Mainland gang problem.

To engage in commercial cannabis production in B.C., a federal licence issued by Health Canada is required. Applications are subject, as has been spoken of before, to a rigorous review process, including an assessment of the physical security measures in place at the facility, recordkeeping methods, safekeeping methods, entry and exit of the product. It’s quite voluminous, going through the administrative requirements to get these licences.

The CSU delivers a provincewide compliance and en­forcement program, prioritizing public safety, protecting our youth and our children and eliminating the criminal element of the cannabis industry. That really is the whole crux of this legislation: to get rid of that criminal element, to give the CSU the powers to be able to do that, to be able to enforce the laws that already exist.

Overall, B.C. is making progress on capturing the illicit market, on getting rid of the illicit market. Monthly licensed cannabis retail sales have grown steadily over the last few years. We learned from the 2021 B.C. Cannabis Use Survey that a majority of people in British Columbia buy their cannabis product from legal sources. People want to do the right thing. They want to buy from a licensed retail store.

The legal cannabis production sector also has grown each year since legalization. As of August of this year, B.C. had 212 federally licensed cannabis producers, 74 of which are microproducers, as well as 34 public cannabis stores, with 441 licences issued for private cannabis retail stores.

Illicit online cannabis sales occur — and this is the really big problem — again being exacerbated by COVID. Illicit online cannabis sales occur from websites that can be operated from anywhere in the world, making it really challenging to investigate and enforce against this. The CSU continues to work with law enforcement, their technology partners and partners locally and across Canada to investigate and disrupt illegal sales online.

CSU is an active member of a national working group comprising representatives from the federal government, Public Safety Canada and Health Canada, provincial governments across the country, various police force agencies and Canada Post — because, frankly, that’s where a lot of the online sales are posted through. It focuses on investigations and disrupting those illegal online cannabis sales.

CSU’s enforcement actions have been successful so far in disrupting online illicit cannabis sales and shutting them down when the enforcement does occur. Some recent statistics — these are very recent — as of September 28 of this year, the CSU has made 308 visits to unlicensed retailers for educational purposes, giving them information on becoming a legalized operator and giving them what the role of the CSU is in this; 84 unlicensed retailers have had follow-up enforcement action when they choose to continue to operate without a licence after initial education visits — again, a collaborative approach.

CSU has seized approximately $31 million in cannabis from the illegal market. That’s money that would have gone to gangs, that would have gone to organized crime, that would have made the opiate crisis worse and that would have bought guns. Some 180 unlicensed retailers have either closed or completely closed, or have stopped selling cannabis, as a direct result of the CSU’s actions, and 58 notices of administrative monetary penalty have been issued, with proposed penalties totalling approximately $39.9 million — almost $40 million — with approximately $1.4 million of these penalties having already been collected.

Over 1,000 illicit cannabis websites have been investigated, and 635 of these were successfully disrupted by the CSU and closed. There’s more information that’s available, and I encourage you all to go and look at that.

[3:25 p.m.]

The CSU continues to maintain dialogue with First Nations communities and governments to address unlicensed retailers that are operating on Indigenous land. CSU works closely to build positive relationships with Indigenous governments, understanding where they have different perspectives and where possible collaboration and resolution can get a result. Again, this is in line with what the CSU did with unlicensed retailers to come in and educate them: “Here’s a way to get licensed.” They’ve been operating for a long time. It gives them some time to either remedy or close.

All in all, it’s much-needed legislation. As we get further and further away from the beginning of cannabis legalization and as we see and we experience what this whole regime is like, we see certain administrative holes. That’s really what this act is designed to do. It’s designed to plug those holes and give our enforcement unit, the CSU, more oomph, so that they can actually do their job. That’s why I support this bill.

L. Doerkson: I want to just take a very brief few minutes to add my comments on Bill 30, the Cannabis Control and Licensing Amendment Act, 2022.

Some of the comments that I just heard are probably…. My concern, why I would support this bill and almost feel that it doesn’t go far enough…. With some of the numbers that I heard with respect to illegal operations, it sounded to me like they outnumber the licensed operations in this province — if I heard that correctly. I certainly would stand to be corrected.

[J. Tegart in the chair.]

The Solicitor General mentioned in his comments earlier that legal operations are faced with the challenge of competing against these illegal operations. The reason why this is important to me is that, as the member for Shuswap mentioned, so many operations are clearly illegal in his riding. We’ve had a number of them in Cariboo-Chilcotin, as well, where we’ve just had a cannabis operation closed down by the authorities — certainly a good step in the right direction.

Again, I think there’s support from our side of the House for this bill. What concerns me is that it’s not being acknowledged how many operations are actually functioning right now and have been for years. I think that that has to be noted.

As I mentioned before, we have a number of operations in Cariboo-Chilcotin. I think many of your members have actually toured one of the operations along with me. They joined us for a tour at the Williams Lake First Nation, where they’ve built an incredible farm-to-retail operation. Part of their operation is retail outlets throughout the province. Of course, they find it very challenging to compete against these illegal operations that are throughout the province. I’m sure I could get that confirmed by the Chief of the Williams Lake First Nation.

It certainly goes further than that. We certainly have a number of retail operations in Cariboo-Chilcotin that have, obviously, gone through the painstaking licensing process. They’ve spent thousands — hundreds of thousands, in fact — on their operations to build beautiful retail outlets, and then find themselves competing against a container, literally a sea can on the side of the road at Lac la Hache, which was just taken down.

So in the committee stage, I need to understand just how it is that these operations are able to set up in the first place. It’s extremely concerning. To the operators — who have just faced not only COVID but a labour strike that caused many challenges for their supply — these retailers are like so many small businesses in our province.

[3:30 p.m.]

They are facing so many challenges, but many of our retailers are not facing these types of illegal operations. So I think we really have to acknowledge that they are prolific throughout the entire province. To the member for Shuswap’s comments, I absolutely agree. Until we admit that we have the problem, I don’t know that we can deal with it.

Now, I know this bill will certainly deal with changes that are occurring online. I think, during the committee stage, we’ll find out just how far that reach will be. Will it affect so many of these operations that are throughout the province?

That’s, I guess, all that I really have to say about Bill 30. I definitely am looking forward to…. I’m sure members of my community and, certainly, owners of these retail operations will be watching this very closely. We have many through Cariboo-Chilcotin, and I know that they are very concerned about the illegal market.

Just one last point, with respect to the numbers that we heard earlier. I’m going to be very focused. I hope that the Solicitor General will clear that up during the committee stage. The idea that our legal operators may be out-numbered by illegal operators is definitely a very big concern.

B. Anderson: I’m absolutely thrilled to be here today and to be able to speak in favour of this bill.

Before cannabis legalization, I actually flew to Ottawa with a friend who invited me so that we would be able to speak with MPs and senators about enabling craft growers to enter the market. It’s really important for legacy cultivators to be able to operate legally and, also, to allow outdoor cannabis. If you would have told me then, in Ottawa, that I would get to speak on cannabis in the B.C. Legislature today, I wouldn’t have believed you, but here I am. So I’m absolutely thrilled.

Cannabis cultivation has always been a large part of the economy in British Columbia but, also, specifically in the Kootenays. A lot of people have been calling for legalization for years. It had provided an economic opportunity of real rural economic diversification when things like sawmills shut down and the logging industry was hurt.

We have a large concentration of growers in the Kootenays that are highly skilled at cultivating some of the best cannabis on the planet. I would just like to thank them and people across British Columbia for the efforts that they made to ensure that cannabis would be legalized.

Now, I know many folks, once cannabis was legalized, thought: “That’s not what we meant.” When we look at the federal regime…. They really took, in my opinion, a fear-based approach. It is tremendously difficult for cultivators to actually be able to transition and move from the medical market into the regulated market, but some of them have. I know it was a very challenging few years for many folks that have worked so hard to enter into this regulated space.

Speaking with people…. This is one of the most challenging sectors to be a part of. So I thank all of them for the work that they’ve been doing. I also want to thank all of the people that have been reaching out to me personally, that have been working with folks like the cannabis secretariat and that have been trying to improve regulations and policy on local government levels, on provincial levels and on federal levels.

Someone did tell me, I think it was on the first day of cannabis legalization, that this is actually…. In their opinion, this is going to be the worst point that we’re at for cannabis legalization, and it’s only going to get better from here. It’s by listening to the people that are the experts and that are in this industry that we are seeing movements here provincially.

We just announced yesterday that we’re going to be allowing farm gate, which is an incredible opportunity for producers. It means that they are going to be able to vertically integrate and actually sell their product from their cultivation site. This is really important. When we look at, say, the wine industry and all the tourism that surrounds that…. The opportunity to show how and where the cannabis that consumers are enjoying is being cultivated is, I think, a really key piece.

[3:35 p.m.]

I know a lot of folks have been working for a really long time. The Craft Cannabis Association, the Kootenay economic cannabis council and others from across British Columbia have been calling for these moves. These are moves…. The cannabis secretariat took time to speak with all of these folks and understand how to do this right. So I’m really glad that we’re making those steps.

Another piece, in August, was direct delivery. When we introduced that, I know a lot of folks reached out, and they were absolutely thrilled. Of course, then there were challenges with the supply chain due to the labour strike.

By direct delivery, you’re enabling growers and processors to have direct relationships with dispensaries, and that’s really critical. It was being called for from the producers, from the processors but also from the dispensaries themselves.

We are making moves forward in cannabis in British Columbia. I truly believe that there’s a huge rural economic opportunity here. In rural British Columbia, we’ve had decades of experience in growing some of the best cannabis in the world. So I am grateful to be able to speak on this bill today.

Another thing we’re exploring is cannabis consumption spaces. Currently, in our provincial legislation, you are not allowed to advertise a place to go to, to consume cannabis or advertise a place to go to after consuming cannabis. We know, in other places, there are things like Ganja Yoga or AirBud&B. These are cannabis-friendly spaces. There’s someone in my local community that has been wanting to see and explore what that looks like.

It also means places like music festivals, where people — this might be shocking to some folks — have traditionally been smoking or consuming cannabis for a very long time. By making these changes here provincially, I think it’s going to be a huge economic opportunity for our sector.

I’ve met with a lot of dispensaries, not just locally in my riding, but also, folks have reached out to me from across the province. One of the key challenges that they had noted was….There are huge opportunities for people. They’re purchasing online. So they’re not actually purchasing directly from the dispensaries that are regulated. This is going to help to address some of that, in this bill.

I also want to talk a little bit about medical cannabis. There is some concern about medical cannabis. The minister spoke to that when he was introducing the bill today. I also want to say that it is a really key and important component of cannabis, cannabis as a medicine.

The Premier did come to the Kootenays last summer. We were able to tour a medical cannabis…. It’s a small outdoor farm. They actually have a partnership with the University of Saskatchewan. They’re looking at different strains and figuring out — it’s an adaptogenic plant — how specific strains are able to help people, in different ways, that are experiencing different medical challenges.

Being able to provide that access I think really continues to be key. Again, we have some of the most incredible experts on this right in the Kootenays, in my riding, which I could not be more proud of.

Going back, also, to having growers transition, the federal government has made, in my opinion, very little effort to actually…. They brought this in saying that this is going to reduce crime. Then they never….

I know some other folks have talked about organized crime. In my community, most of the people that are cultivating cannabis, historically were cultivating cannabis, were not involved in the type of organized crime you think of. They often got into the cannabis industry because they themselves were sick and they needed cannabis in order to feel better and to get them through whatever medical condition. Then they found out that they were really good at that. So then they were providing that medicine, again, to other people.

I spoke with a lot of folks. With cannabis legalization, they really wanted to transition, but the pathway forward was not clear. We had folks rolling through the Kootenays at events that were making these massive promises. “If you sign up with us, we’re going to guarantee that you’re going to be able to transition.” Then they were abandoning these folks, after getting paid large amounts of money.

[3:40 p.m.]

It was really creating a lot of strain and stress on our community. I was really grateful when the provincial government actually funded the cannabis business transition initiative, which was through Community Futures. They worked with hundreds of cultivators locally there to try to support them through that transition. Some of them found out that it wasn’t going to be possible for them, but some of them were successful.

Greg, up near Kaslo, was one of those folks. I’ve met with Greg a few times. We’ve talked about the challenges of being a small, microproducer. Greg is really good at what he does. When I met with him again this summer and we sat in his backyard, he was feeling that it was finally actually worth it for him. After he had gone through all of those struggles, he was starting to see the light.

Part of the work that we’re doing here today is going to support people like Greg, people like Che, people like Janeen, people like Buddy’s Place and The Potorium — all of these folks that have been working really hard to make it in the legal cannabis sphere. We need to continue to support the economic opportunities and make these changes so that, in places in rural British Columbia, we can have a thriving cannabis industry that’s going to benefit our entire rural economy.

With this, I am very grateful. Again, I just want to say a huge thank-you to all of the advocates that have worked incredibly hard to get us where we’re at. We know that there’s more work to do.

I will continue to voice my support and keep feeding what you’re telling me to our government so we can make those changes. I know folks like the cannabis secretariat and the minister are also listening.

I did want to speak to getting to meet Chief Sellers and the Williams Lake First Nation — and their entire team, of course — up in Williams Lake at the Sugar Cane Cannabis facility in June. It was incredible to meet with them. They have this brand-new, beautiful band office. We sat down. They talked about some of the challenges that they were facing but really about the opportunity that they saw for their entire community.

We drove down to the space. You walk in. It’s going to be the space where they’re going to be selling their cannabis. It’s an absolutely beautiful space — huge, big windows. Then a button is pressed. There’s a window, and there’s sort of this garage door effect that lifts up. You can see the cannabis plants actually being grown, right there, where that product is going to be sold.

Things like that…. We’re actually lifting the veil of the cannabis industry. Folks are getting to learn more about the plant, what works for them and what doesn’t work for them.

It’s an adaptogenic plant. Different people find canna­bis…. Different cannabis is going to work for them in different ways. By being able to actually see what these plants are like and then purchase the product right there…. It’s creating a tourism opportunity. It’s an economic opportunity.

I could see the pride and how excited they were. We got to meet some of the folks that were trimming. They were talking about how that’s where they wanted to work and just the jobs that they were creating in these rural and remote communities.

These are Indigenous communities. It’s a piece of reconciliation. We’ve had six First Nations sign 119 agreements, which is fantastic.

I just want to, again, say my support for this bill, thank the minister for the work that they’ve done, thank the cannabis secretariat and thank all of the advocates in the cannabis industry for all of the work that they’ve done over the years.

T. Wat: I’m pleased to rise in the House today to speak briefly on Bill 30. I do acknowledge the need for this bill, especially as we strive to ensure that our legislation is up to date with the cannabis market and the realities on the ground.

My constituents in Richmond North Centre, with over 50 percent being Chinese Canadians, are concerned about the availability of cannabis and how this government is ensuring that our families are kept safe.

[3:45 p.m.]

As the authority responsible for compliance and en­forcement under the Cannabis Control and Licensing Act, it is important, as this bill proposes, that commun­ity safety unit, CSU, investigations can be effectively carried out while the illicit market shifts and changes. This is especially important, as cannabis has become so widely available and more accessible within our society today. This has only increased the concern that people have about ensuring that these substances are not contaminated and exposed to young people and that the government is taking active measures to adapt and evolve alongside cannabis.

While this bill puts forward straightforward steps to address some of this concern, the recent surge in online illegal dispensaries is extremely troubling. Not only are these websites making cannabis available to young children and others under 19, but this product also completely skips government oversight for ensuring these substances are regulated, inspected and safe for consumption.

As we all know, the Internet — and what we are able to do with it — is quite complex and ever changing, which is why it is crucial that we constantly look to improve the efforts of government enforcement on this matter. The failure to do so can be a significant risk to the public. During times like this, when we have rising issues of crime, mental health and health care, we must be doing what we can, proactively, to keep the public safe.

It is encouraging to see this legislation brought forward. We look forward to paying more close attention to clause 14 as we enter the committee stage. I do echo the sentiments my colleagues have shared on this matter.

R. Russell: I’m proud and happy to rise in the House today to speak in favour of this bill. I think when legalization did happen, we saw a lot of opportunity. We certainly saw a lot of challenges at the same time. This bill is put in place to help us address some of those challenges particularly associated with that.

I think part of the opportunity that we saw there — and the challenge, at the same time — is: how do we support producers that were illicit to transition into the legal market? How do we make sure that we’re providing safe product for consumers that we know have an interest in that product? How do we reduce some of the stigma associated with cannabis use at the same time?

I know, for a lot of us…. We’ve heard the member for Nelson-Creston speak to it, and I think the member for Cariboo-Chilcotin was also referencing the same — the need to make sure we can do this in a meaningful way so that it actually contributes to rural economic development in a functional and an effective way.

It’s one of these opportunities — particularly with the growth in the craft end of the spectrum, I would say — for rural economies to build more resilience into the economic engines that they have. It’s an agricultural product that comes with high value and high labour involved with the preparation and processing. Those are the kinds of economic opportunities, I think, that really do matter for our rural communities but only if we can do so safely and in a way that we know is supporting those communities.

There were a lot of questions that I thought might be asked. My colleague from Richmond-Queensborough answered a lot of those questions, so I won’t go over those.

I will say that this bill…. We heard the Attorney General earlier today talk about being hard on crime but also being hard on the causes of crime. I think that this is partly what we’re trying to move forward here — a bill that gives us more of the tools, gives the authority to the community safety unit to be able to do a better job of compliance and enforcement in these illegal operations specifically.

[3:50 p.m.]

I appreciate the comments from the member for Cariboo-Chilcotin earlier. I think I agree with most of those. As he referenced, as well as the member for Nelson-Creston, we had a good opportunity to see, from Williams Lake First Nation — and hear from them — about not only all of the processes that they had in place to deliver a safe product in a safe way, but also to hear from them about how important this can be for their members and for their nation to be able to help build that economic independence and economic development.

That, so that people know, is translated into economic opportunities from retail outlets in a lot of communities well beyond Williams Lake. This is again, for me, from that rural development perspective, a really valuable opportunity to those bands, to those nations and beyond.

In the same vein, I have been working with Osoyoos Indian Band. I know it is a topic of very high interest to them. I’ve been working with Chief Louie there, as well as Councillor McGinnis. The opportunities there that they see are also enormous. They’ve been exploring the section 119 opportunities to see how they help build that as well.

Other bands that I have met across the province have also mentioned…. You know, there are a lot that struggle with this challenge of illegal operators that are setting up. Once they have legal operations that are in the area or on the reserve, for example, how do they effectively navigate through the process of compliance and enforcement on those illegal operations?

A number of bands that I have been talking to want to see that, but they need the tools to make sure they’re able to do that. This piece of legislation, for me, is promising for that reason. It helps give us more tools to walk down that path.

In our Declaration Act action plan, we made a commitment to: “Advance a collaborative approach to cannabis-related governance and jurisdictions between First Nations and the province….” This is really the impetus for me to stand up and speak to this, as I see this as a step in the right direction on that front, helping us help those nations and bands that want to operate in a safe way to do that effectively.

I also would say that in some of these situations, we’ve seen what I would call cultural appropriation. I don’t know what the current term might be for private ventures that are not Indigenous-owned misrepresenting themselves as being owned and operated by Indigenous communities or Indigenous members of those nations. This also gives us one more tool in the toolkit to help push back against those kinds of operators.

Really, my main point here is to support this from the perspective of rural economic development, in a safe way that is good for our communities; support rural resilience in the communities, which we care about; and help develop an opportunity.

We know, if it’s done right, it can certainly serve our communities well and deliver a lot of benefits, as long as we’re taking steps to do so in a safe and responsible way and helping develop the industry that could be of huge benefit in our rural communities, particularly around the craft sector and helping transition those other operators.

J. Rice: I rise today to speak to the Cannabis Control and Licensing Act. The Cannabis Control and Licensing Act includes an extensive compliance and enforcement regime. A key component of this regime is the community safety unit, which my colleagues were just speaking of earlier and which has the authority for compliance and enforcement with respect to unlicensed sales.

The amendments to the Cannabis Control and Licensing Act will strengthen enforcement against illicit cannabis operations. The amendments ensure that the CSU, the community safety unit, has the necessary authority to conduct enforcement against illicit online businesses and clarify the process for administrative hearings regarding cannabis enforcement.

[3:55 p.m.]

These amendments are another way we are cracking down on illicit cannabis operations and ensuring that British Columbians who choose to consume cannabis can buy safe, legal products. The proposed amendments to the Cannabis Control and Licensing Act will streamline administrative hearings for cannabis enforcement and ensure the community safety unit has the necessary auth­ority to conduct enforcement against illicit online businesses.

The CSU became operational in April 2019 and operates with investigations created through a variety of reactive and proactive strategies, with complaints being received from the public, government agencies, police, legal market operators and others.

B.C. is the only province in Canada to establish an en­forcement unit to enforce cannabis legalization and deal with illegal retail sales. Pre-legalization, B.C. was the center of Canada’s illicit cannabis market. We knew that the transition to a legal industry would be challenging, given that history. B.C. has a comprehensive compliance and enforcement regime, with the CSU playing a central role. The CSU’s approach to enforcement activities is focused on non-criminal sanctions through administrative monetary penalties. The unit is continuing to make significant progress, disrupting the illicit market supply and sales channels.

The CSU reviews each complaint and will follow up with investigations as required. CSU officers are actively following up with unlicensed retailers in communities across British Columbia and have been increasing enforcement action. All along, the aim has been voluntary compliance, and we have been very clear that once legal cannabis retail outlets became operational in a community, the illegal retailers would face enforcement activities from the CSU. This is just another way we’re protecting cannabis consumers, and ensuring that they can buy safe, tested products from a legal source.

A key aspect of B.C’s cannabis strategy is to eliminate the illicit market and keep profits out of the hands of organized crime. The CSU is a regulatory enforcement unit that has enforcement authority over these illicit cannabis operations. When dealing with illegal growing operations, especially when gang elements are involved, Combined Forces Special Enforcement Unit, the CFSEU-BC, provides provincewide coordination for organized crime, gang prevention and disruption, and conducts operations in many jurisdictions that have a positive impact on the Lower Mainland gang problem.

To engage in commercial cannabis production in B. C., a federal licence is issued by Health Canada. It’s required. Applications are subject to a rigorous review process, including an assessment of the physical security measures in place at the facility, recordkeeping methods and procedures and security clearance checks. The CSU delivers a provincewide compliance and enforcement program, prioritizing public safety, protecting youth and children and eliminating the criminal element of the cannabis industry.

Overall, B.C. is making progress on capturing the illicit market. Monthly licensed cannabis retail sales have grown steadily, and we learned from the 2021 B.C. Cannabis Youth Survey that the majority of people in B.C. buy their cannabis products from legal sources. The legal cannabis production sector has also grown each year since legalization. As of this past August, B.C. had 212 federally licensed cannabis producers, 74 of which are microproducers, as well as 34 public cannabis stores, and 441 licences issued for private cannabis retail stores.

[4:00 p.m.]

Illicit online cannabis sales occur from websites that can be operated from anywhere, making them extremely challenging to investigate and enforce against. The CSU continues to work with law enforcement partners, locally and across Canada, to investigate and disrupt illegal online sales. The CSU is an active member of a national working group comprising representatives from federal government departments, Public Safety Canada, Health Canada, provincial governments, various police agencies and Canada Post that focuses on investigations and disruption of illegal online cannabis sales.

The CSU’s enforcement actions have been successful in disrupting online illicit cannabis sales and shutting them down when enforcement occurs. As of September 28, 2022, the CSU has made 308 visits to unlicensed retailers for educational purposes, information on becoming a legalized operator and the role of the CSU; and 84 unlicensed retailers have had follow-up enforcement action when they chose to continue to operate without a licence after initial education visits.

The CSU has seized approximately $31 million in cannabis from the illegal market, and 189 unlicensed retailers have either closed or have stopped selling cannabis as a result of the CSU’s actions. Fifty-eight notices of administrative monetary penalty have been issued with proposed penalties totalling almost $40 million, with approximately $1.45 million of these penalties having been collected. Some 1,086 illicit cannabis websites have been investigated, and 635 of these websites were successfully disrupted by the CSU.

I wanted to talk about how the CSU works with First Nations communities. The CSU continues to maintain dialogue with First Nations communities and governments to address unlicensed retailers operating on Indigenous land. The CSU is working to build positive relationships with Indigenous governments, understanding where they have different perspectives, and, where possible, collaborating to find solutions. These efforts are having results, as positive relationships with some First Nations governments have helped obtain compliance from unlicensed retailers that were operating on First Nations reserve land.

The CSU has also received cooperation and support from several First Nation communities to carry out in­spections and seizures of cannabis from unlicensed retail and production facilities operating on reserve. The prov­ince is committed to working collaboratively with First Nations on a government-to-government basis towards long-term, sustainable approaches that ensure that cannabis sold in Indigenous communities is safe and regulated.

This is demonstrated in the cannabis agreements we’ve entered into with First Nations, and the recent Declaration Act action plan committed to “advance a collaborative approach to cannabis-related governance and jurisdiction between First Nations and the province.” First Nations were consulted on these legislative amendments.

I’d like to just conclude my remarks by stating that I fully support these amendments, and I look forward to other people’s support on this bill.

Deputy Speaker: Seeing no other speakers…. I don’t see the minister in the House to make any final comments or close debate.

Members, the question is second reading of Bill 30.

Motion approved.

Hon. L. Beare: I move that the bill be committed to a Committee of the Whole House to be considered at the next sitting of the House after today.

Bill 30, Cannabis Control and Licensing Amendment Act, 2022, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Hon. L. Beare: I call second reading of Bill 29, Mortgage Services Act, and I request a brief five-minute recess.

Deputy Speaker: We will go into recess for five minutes.

The House recessed from 4:05 p.m. to 4:09 p.m.

[J. Tegart in the chair.]

Deputy Speaker: Government House Leader.

BILL 29 — MORTGAGE SERVICES ACT

Hon. M. Farnworth: Thank you, hon. Chair. It’s nice to see you in the chair.

I move that Bill 29 be read a second time now.

[4:10 p.m.]

The Mortgage Services Act will repeal and replace the Mortgage Brokers Act with modern framework legislation. The Mortgage Brokers Act, despite amendments made over the years, is outdated.

The Mortgage Brokers Act was first introduced in 1972, 50 years ago, to protect borrowers from harsh and unconscionable mortgage transactions. At that time, less reputable brokers could charge fees for a mortgage and did not disclose the impact of those fees on the cost of borrowing. To protect consumers, the act was introduced to require mortgage brokers to register their business and to provide borrowers with disclosure showing the true cost of borrowing. The registrar of mortgage brokers was appointed to maintain a register, to investigate complaints and to order penalties, where warranted, to enforce compliance.

Since 1972, the financial services market has changed profoundly. Mortgage brokers and private lenders are an important and increasing part of the mortgage market for both borrowers and investors. The rise in online technology is also part of this profound change.

The Mortgage Services Act is designed to be appropriate for today’s financial services market and to allow for changes in the future. It will improve consumer protection, promote provincial harmonization and guide industry to adopt responsible business practices.

The Mortgage Services Act will require all mortgage service providers to become licensed, with limited exceptions, set minimum standards of conduct, require a duty of care to consumers and enhance the disclosure and reporting requirements for complex mortgage products. Those in the business of providing mortgage services in British Columbia will be subject to the act as brokers and brokerages. However, the act does not apply to all mortgage service providers. People who are already subject to federal or provincial regulation are exempt. For example, banks, credit unions and their employees are exempt.

Under the Mortgage Services Act’s licensing process, the superintendent of mortgage services will determine the licensing application forms and procedures. Licensing fees will be set by regulations, and qualifications will be set by rules.

The Mortgage Services Act requires the superintendent to respond to complaints. It provides the superintendent with modern investigation powers to evaluate complaints and to determine compliance with the act.

The Mortgage Services Act provides progressive escalating powers of discipline to promote compliance and the ability to penalize non-compliance. The act provides for administrative penalties for minor contraventions to increase the efficiency and timeliness of discipline. It will promote fairness. It clearly sets out a licensee’s rights and obligations on discipline, including the right to receive a notice that explains the infraction and the right to appeal to the Financial Services Tribunal.

Finally, it provides that the superintendent can impose discipline penalties sufficient to deter unlawful activity and provides the superintendent with the ability to impose penalties that would require licensees to give up their unlawful gains.

The B.C. Financial Services Authority is given rule-making power over licences and licensee conduct. The power is subject to accountabilities, with a requirement for public consultations and ministerial approval of proposed rules or amendments to the rules. Rules will set out the education and experience required to be licensed, conduct and business practices, disclosure obligations and annual reporting requirements. The rule-making power will allow the B.C. Financial Services Authority to adapt to changes in the marketplace and respond to emerging issues in the sector.

Basing the Mortgage Services Act framework on legislation, on the Real Estate Services Act, will leverage the British Columbia Financial Services Authority’s processes and procedures developed for Real Estate Services Act licensees. This increases efficiency and promotes transparency across the real estate sector, with the B.C. Financial Services Authority as the sole regulator.

[4:15 p.m.]

The Mortgage Services Act is consistent with recommendations for the regulation of mortgage brokers and private lenders in the 2022 final report of the Commission of Inquiry into Money Laundering in British Columbia, led by Commissioner Austin Cullen. The Mortgage Services Act incorporates 12 of the Cullen commission recommendations by establishing licensing levels and categories to distinguish between the regulation of mortgage lenders, mortgage brokers and principal brokers, increasing financial penalties to align with the Real Estate Services Act, amending appeal procedures and granting the B.C. Financial Services Authority rule-making powers over licensing and licensee conduct.

Although the Cullen commission recommends separate legislation to regulate private lenders, the Mortgage Services Act includes all private lenders, unless otherwise exempt, within the scope of persons required to be licensed. Including all private lenders in the Mortgage Services Act leverages the Real Estate Services Act licensing model. The Mortgage Services Act will capture all private lender information under one statute, avoid legislative gaps and minimize lenders’ regulatory burden.

In developing this legislation, we have been mindful of the requirements of the Declaration on the Rights of Indigenous Peoples Act. We have done an assessment of this legislation as it relates to aligning with the UN declaration on the rights of Indigenous peoples. The commitment to align laws with the UN declaration will not affect every provincial law.

While many provincial laws relate to the rights set out in the UN declaration, other laws don’t have a unique or specific effect on Indigenous rights. Repealing and replacing the Mortgage Brokers Act as proposed by this bill does not uniquely affect the Indigenous rights described in the UN declaration.

This bill will create a stronger framework for regulating mortgage services and will help ensure that consumers are better protected. People looking to get a mortgage can continue to have confidence that B.C. has a modern and effective framework for regulating mortgage services. This bill will also ensure that B.C. has world-leading protections against money laundering. Creating a modern Mortgage Services Act is an essential part of that goal.

With that, hon. Speaker, I will finish my opening remarks and look forward to comments from members on both sides of the House.

P. Milobar: I rise to continue the debate on Bill 29 today. As we heard, it’s looking at regulating the financial services in terms of mortgage brokers in British Columbia.

Certainly, I think everyone would like mortgage brokers to be able to work in an area of transparency and openness so that people making what is, for most people, their largest purchase in their lives, securing that loan, will be able to actually properly access the types of information we heard from the minister previously in terms of fees being charged, those types of costs that are built into the mortgage that they’re placing through a mortgage broker.

Of course, transparency is always a good thing, and this side of the House would agree with that. That’s why the bigger concern we have with this type of legislation is to make sure that the rules and the regulations that are brought in are operating as efficiently as possible so that the protections are there but there’s not unnecessary delay.

There are not unnecessary drags on reporting onerous issues for mortgage brokers to have to deal with. That takes them away from doing what their work should be, which is to be helping people find affordable ways to finance their purchases and their homes. That has to be done in a way that does ensure, as the minister just said, that things are being done in a legal way and in a transparent way.

[4:20 p.m.]

That’s why we’ll be keeping a close eye as this bill moves through to committee stage, questioning and trying to get ascertained things around fees and charges that will be out in regulation, those types of timelines and those types of costs so that people can have a better understanding of what the government’s intention is with this bill moving forward. I think it’s important for the mortgage brokers to understand that, and it’s important for the public to understand that.

As we saw with the changes in the Real Estate Act, those fees were a concern for us then, and these will continue to be a concern for us, in that they’re only to be set by regulation. There’s nothing in this legislation that actually says what those fees will be.

I guess that’s an underlying concern that we, as opposition, seem to have with many pieces of legislation that have been coming forward from government, if we want to talk about transparency. Transparency is absolutely needed for people with their mortgage brokers. The government seems to have no problem legislating other agencies to have transparency. Where the government seems to fall short is in transparency on their own actions. We’ve seen that, where they got voted as the least transparent government in Canada, the most secretive government in Canada.

To not have any idea, in this legislation, of what those regulatory fees, those licensing fees, will be is a shame. To not have a better understanding of what type of consultation was done, ahead of time, with the mortgage brokers is a problem as well. Those are the types of areas that we’ll have a lot of questions on as we move forward with this bill.

Certainly, we want to make sure — again, I want to reiterate — that people are protected with their purchases, with their understanding of the mortgage brokers’ fees and charges. We want to make sure that the funds being used to help purchase, those loans, are coming from legal sources and are being brought into our economy in a proper way that meets all of the laws of Canada and of British Columbia, in a way that does not spur on things like money laundering.

The modernization of bills like this — I think we’ve said this as an opposition throughout the 5½ years now — is expected and needed. Regularly, any government needs to be looking at how things have changed, how systems have changed, how people in their day-to-day lives are accessing things like mortgages, brokers and lenders in a different way than would have existed before.

In 1972, when this was first brought in as an act, the first blush of this, there would have been no comprehension, even, of having apps that you could go onto and literally mortgage your house in the matter of a few minutes, sitting on your phone. We need to make sure that there is that better transparency when those types of loans are sought — especially in a time of record unaffordability, where people are struggling to pay their bills and are looking at things like second mortgages on their homes, unfortunately, to try to keep their heads above water, to try to look for better times ahead.

We need to make sure that those consumers are protected when they’re at their most vulnerable with a lot of those people trying to secure and refinance things, be it a home or cars or whatever, to make sure that those funds being used are coming, again, in legal ways.

We do look forward to the debate on this, moving forward. We won’t spend a lot of time on debate today on this, but we’ll certainly make sure that we have a long list of questions. There are certainly a lot of clauses in this bill to go through to make sure there’s a broad understanding for the public, and for the mortgage brokers as well, of what the true intent of the government is.

Again, a lot will hinge on things like the fee structure, the timing of the superintendent being in place, how efficiently that will run and work, and how it will tie in with the changes to the Real Estate Act, as the minister mentioned, that happened earlier.

With that, I look forward to hearing other comments and to the future debate.

B. Bailey: I rise today to speak on Bill 29, the Mortgage Services Act. This proposed legislation will replace the Mortgage Brokers Act with an effective, efficient and modern regulatory framework.

Legislation currently regulating mortgage brokers was originally enacted in 1972 to protect consumers from hidden fees and harsh mortgage transactions. Although amended several times, it has simply not kept pace with evolving national and international standards in consumer protection and changes in the financial services model.

[4:25 p.m.]

The bill is really about further addressing two aspects in the real estate sector: first, consumer protection and, second, transparency. The changes proposed in this legislation will provide a much stronger framework for the regulation of mortgage brokers, in order to give both borrowers and investors peace of mind. We need to provide the B.C. Financial Services Authority, the BCFSA, with the tools to regulate the financial services industry that we find ourselves in today while guiding industry to adopt responsible business practices into the future.

We want to make sure B.C. has effective consumer-protective legislation and world-leading protections against money laundering. Creating the Mortgage Services Act is an essential part of that. Bill 29, the Mortgage Services Act, provides a modern framework to address many of the Cullen commission’s recommendations to combat money laundering, including by giving the BCFSA rule-making powers over conduct in the mortgage services industry.

It enhances consumer protection by harmonizing laws across the real estate sector in B.C. and by helping to encourage responsible business conduct. It gives administrative enforcement and rule-making powers to the BCFSA as sole regulator for the real estate sector.

People who are currently required to register under the Mortgage Brokers Act will now need to be licensed. The new legislation also introduces penalties consistent with the discipline processes and procedures of the Real Estate Services Act. Like the existing act, anyone subject to federal or provincial regulation is exempt from licensing, as is currently the case. This includes banks, credit unions and their employees, insurance companies and lawyers providing incidental mortgage services.

Before the act is brought into force, we’ll be working with the BCFSA to develop the important details. That being said, we’ll ensure that there’s ample time for people to learn about their responsibilities under the new act. We’ll also ensure that there’s a transition period for businesses and individuals who are registered under the act, so that they can take the necessary steps to become licensed.

To quote Blair Morrison, BCFSA CEO and registrar of mortgage brokers:

“The new act will provide BCFSA with greater tools to enhance the regulation of mortgage broker services in British Columbia. The increased powers to investigate, discipline, license and set standards of conduct will ultimately mean better protection for both borrowers and lenders, as well as enabling the BCFSA to better address emerging products and services in the future.”

One of the important pending changes is an increase to fines for contravening the act, starting with a new administrative penalty of as much as $100,000. Disciplinary penalties will be increased from a maximum of $50,000 to $500,000. Individuals or corporations with more than one conviction could face a penalty of as much as $2.5 million, increased from a maximum of $200,000.

Members of the industry will have ample time to learn about their responsibilities under the new act. Changes will be implemented following development with the BCFSA and industry education, with the earliest timeline for the introduction of the new rules estimated for late 2023.

Why now? Although the Mortgage Brokers Act was originally introduced in the ’70s, there have been many updates over the years. With rapidly changing technology, we need a new, modern framework that could adapt to an evolving sector.

[S. Chandra Herbert in the chair.]

I’ve spoken about what, I’ve spoken about how, and I’ve spoken about when. Now I really want to speak about why. Why is this legislation necessary?

[4:30 p.m.]

Updating the legislation is a priority, as the Cullen commission and the Expert Panel on Money Laundering in B.C. Real Estate underlined the need to take action on curbing money laundering in this province. These changes are in line with direct recommendations from the Cullen commission.

Our government is acting because the B.C. Liberal government failed to stop money laundering as it emerged as a threat in our province. I want people to remember this. They ignored this problem and turned their backs on an issue that had serious negative consequences for our society. They ignored it. “Nothing to see here.”

Here’s what the Cullen commission concluded about the previous government’s role in money laundering: “What was lacking prior to 2018 was not the identification of an appropriate policy response but rather the will, on the part of both government and industry, to take the kind of decisive action necessary to effectively respond to this problem.” Page 15.

The member for Abbotsford West’s direction to the BCLC failed to go far enough in that it did not require that the BCLC immediately cease accepting the highly suspicious cash that had become commonplace in industry. I note that at the September 2015 briefing, the member for Abbotsford West was presented with example directives which would have achieved that objective.

“Despite having recognized, by 2015, that there was a need to refuse at least some suspicious cash, BCLC continued to accept it in substantial quantities over the next three years.” Page 703.

“The actions taken” — they mentioned the person’s name; I’ll say the member for Abbotsford West — “at that time and in the years that followed were not commensurate with the gravity of the crisis facing the industry. The inadequacy of these actions permitted money laundering to persist at unacceptable levels in the gaming industry for more than two additional years.” Page 757.

The lack of will was exhibited by members opposite. In addition to the member for Abbotsford West, nine members of the opposition served in the cabinet that did not have the will to act on making changes to stop money laundering. And the Leader of the Opposition is dodging responsibility. When he was forced to apologize for his government’s role in allowing money laundering to happen, he said he wasn’t in government at the time. That’s blatantly false.

Here’s the timeline that the commission provided for gaming. Following the emergence in 2008, money laundering in the gaming industry persisted as a significant issue for the next decade, until 2018. Page 640. Despite his comments otherwise, the Leader of the Opposition was in government for five of the ten years when money laundering ramped up in our province.

In addition, the commission revealed that the former government put significant pressure on the BCLC to meet revenue targets when the opposition leader was Minister of Finance, from 2011 to 2012. During that time, BCLC CEO Michael Graydon sent emails to his staff indicating that the government was pressuring BCLC to increase revenue. “It’s imperative that your division come in with these numbers or better,” Grayson wrote. “As I have said before, Victoria is not keen to pay incentives if budgets are not met.” Vancouver Sun, June 16, 2022.

While the previous government was pushing for more return and turning a blind eye to this incredibly serious problem…. Under the leadership of our previous Attorney General, we addressed it, and we continue to address it. That’s the difference. They’re all about the dollar, and we are all about the people. That’s why we’re working to ensure the safety of consumers in this important change in our real estate sector.

[4:35 p.m.]

I want to, before I conclude, talk a little bit about why money laundering was so harmful in our province and the implications that are still occurring as a result of this.

We know it had implications in our real estate sector. There’s also some suggestion that it has implication in the increase of opioid use. When we think about what’s happened to people, people in my riding, in regards to the poisoned drug epidemic, it’s just horrific. There’s been so much harm caused.

This is more than just a story about expensive cars and expensive real estate, cars being money laundered through, Ferraris that are improperly accounted for. This is a story about how it affects people’s lives, the lives of people who can’t afford to buy houses. We know that the impact on the real estate market was extremely negative, and the impact on people who are suffering from the opioid crisis.

I end this by just saying that choosing to turn a blind eye to this crisis at that time was incredibly harmful and still harms people, in fact. There are implications today. So as we do this work to clean up and accept the recommendations of the Cullen report…. This is incredibly important work. It has very, very serious impacts on people’s lives, and this cleanup is very, very necessary.

K. Kirkpatrick: I’m not sure what the previous member’s monologue had to do with Bill 29. I will speak to Bill 29 myself right now, which looks at regulating mortgage services under the financial services in B.C.

Now, we all want our regulators to be as effective as possible. They serve a critical function. Ensuring they can perform a function successfully and efficiently as well…. As a former regulator myself, I’ve seen how good intentions in legislation can unwittingly result in an increase in or overburdening of additional reporting and other requirements. However, the regulation of financial markets, including real estate and mortgage brokerage, is in the public’s best interest.

Mortgage brokers play an important role to help a potential purchaser navigate and understand their own financing needs and to search for a mortgage that will best fit their particular situation. Mortgage brokers work as a go-between with the borrower and lender and can often reduce the cost of borrowing for purchasers and reduce the stress. They can be an invaluable source, particularly for first-time purchasers who may lack experience or relationships with financial institutions or might be intimidated by the process.

This is often the largest and most significant financial transaction in a person’s lifetime. When you’re seeking a mortgage…. It can also come at a time when people are having financial difficulties or credit issues, and they can be quite vulnerable and need that support and additional information.

If this bill is passed, it will put regulatory authority in the hands of the BCFSA via the superintendent of financial institutions. The process requires, in order to have this happen, a number of legislative changes, which are in­cluded in the bill we see before us today.

These measures, all covered in the act, include establishing licensing levels; better defining mortgage services to distinguish between the regulation of mortgage lenders, mortgage brokers and principal brokers; and increasing financial penalties, which will then align with what is found in the Real Estate Services Act. It will also amend the appeals procedure. This is in addition to granting the BCFSA rule-making powers over licensing and licensee conduct.

As mentioned, this is simply the latest step in government’s process of bringing regulatory authority under a single financial services regulator in the BCFSA. As my colleague from Kamloops–North Thompson said, as we previously debated other establishing legislation for BCFSA, we were concerned about potential fee increases to specific financial sectors as a result of these changes.

[4:40 p.m.]

It is certainly something that my colleagues and I will be canvassing during the committee stage of this bill just so we have more clarity and transparency on what that will mean and how it will impact the sector.

We’ll also be looking out to ensure that all fees applied as a result of these changes are fair and make sense. As always, in the committee stage, we will continue to be asking questions to clarify exactly what these changes will look like in practice and how they will impact the daily lives of British Columbians, particularly in light of rising inflation in this housing crisis.

At the end of the day, we support a nimble, forward-looking regulator that still balances the interests of the sector that it oversees and that meets the needs of British Columbians.

H. Yao: Thank you so much for the opportunity to speak on Bill 29. I do want to start to talk a little bit more on how it impacts the little people.

I think one of the key factors we need to understand is Bill 29 is built upon recommendations by the Cullen report, talking about how money laundering has actually impacted our community and how the Mortgage Services Act helps us put in regulation and helps us ensure individuals such as myself and many other British Columbians are able to have trust between a board and a lender when you actually have a mortgage purchase.

Unlike anybody who’s wealthy or rich, as an individual who is making a medium income, our home is our biggest investment, and we’ve often been driven by the unaffordability of the housing crisis. That is actually pushing the housing market so high, and many people are looking for any way to make housing more affordable by finding interest cuts or anywhere with a cheaper mortgage rate through various financial institutions or private mortgage lenders.

Yet we have to understand where the money is coming from and how that money is fueling harmful activities in British Columbia that hurts other British Columbians. We are making sure that whatever is happening, it supports British Columbia’s economic growth.

I would like to maybe take everybody and have a little quick trip in the city I am representing. I’m representing a quarter…. I love to share the representation with my colleagues here as well.

If you’ve ever driven down a certain amount of streets around the Steveston area, around No. 5 or No. 6 Road, you will see mansions that will make this Legislature look equivalent in size. You will see houses that are being built largely to a point that they can compete against regular elementary to secondary school size, and then we are looking at a housing market where townhouses can cost over $1 million to purchase.

It’s all driven by the unaffordable market, and we have mortgage service providers who are able to, I will assume, receive money from sources that could be questionable, allowing them to actually lend it at a lower interest rate compared to our typical financial service providers. It creates the business opportunity for people to look for savings, to look for affordability and to look forward to starting up their first home. That’s why it’s so important for us to create an equal, safe, competitive battleground for all mortgage providers to compete in a transparent and trusting, trustworthy matter.

We often talk about how the money launderers impact our society, how there are bags of money they can carry into casinos and how they’re actually being transferred and being washed, funnelled into various opportunities in the communities. That’s actually creating unaffordability, and it’s creating an affordability housing crisis. This has been affecting our society for quite a long time, and we do need to look for ways to continuously allows our mortgage service providers to provide services that are dependable and trustworthy and for a lender, an investment in peace of mind.

I heard many different speakers spoke up before me. I want to thank them for sharing their thoughts. I think one of the key factors we continue looking after is that a mortgage, in the end, is the biggest investment. It’s the biggest investment anybody often has to make in their lifetime, and we talk about how even a 0.5 percent difference, a 0.25 percent difference, could make a huge difference.

I actually know, when I go to different various community events, that a lot of people are private service mortgage providers who are working hard, who are trying to do the right thing and who are literally just trying to make a living. But we need to make sure we are all competing in the same playing field.

We want to make sure everybody, when they’re pro­viding mortgage services, are providing in a way that we know the source of funding was through transparency, and make sure people who are borrowing the money and people who are lending the money — that they’re all participating in a way that benefits British Columbia as a whole. We also need to understand the relationship that’s been built between our mortgage service providers and a lot of family members.

[4:45 p.m.]

Our individuals in British Columbia…. Even in Richmond, when you’re trying to purchase a house, the mortgage can go up to 30, 40, 50 percent of the monthly family household income, and they’re also always trying to look for ways to support.

I’m so glad the Cullen report identified various loopholes in civil society, including mortgage services in the past, that’s allowing money that’s not meant to be in British Columbia’s economic system to be identified and to allow us to have clean economic growth and prosperity. That’s designed to help families settle down, to make life more affordable, to allow individuals to be able to borrow money without the fear of not knowing where the money is coming from and for lenders to be able to invest with their peace of mind.

Again, British Columbians have been suffering a lot under the current affordability challenges and the housing crisis, and a lot of this has been brewing for many years in the past through the money laundering for multiple years, through years of lack of regulation and lack of transparency.

I heard members of the opposition talking about the importance of finding a balance, and we, too, believe in the importance of finding the balance. But I think fairness and transparency take a greater priority when it comes to supporting our mortgage industry — to ensure that all service providers, all industries, are all functioning in a way that benefits our community as a whole.

Without further comment, I am going to pass on to the next person. Thank you so much, Speaker, for the opportunity to speak.

B. D’Eith: I’m very pleased to rise today on Bill 29, the Mortgage Services Act.

Interjection.

B. D’Eith: Anyway, I’d very much love to speak in support of Bill 29, Mortgage Services Act. Before I start, we should probably take a step back and look at the idea of money laundering and what’s been going on in our province over the last decade and a half or so or longer and the impact it’s had.

This idea that somehow money laundering is a victimless crime is ludicrous. In fact, it’s driven the drug trade. It’s contributed to the opioid crisis in a significant way. It’s contributed to driving up housing prices in British Columbia, which is actually one of our key issues now — housing affordability.

It’s really important to understand that when we took government five years ago, one of the first things that the former Attorney General did was start to tackle money laundering. From that, came out a commission report that was really important because we had to get at the details of what was going on.

The Cullen commission’s expert panel on money laundering came out, and there were some really key recommendations. Those recommendations are being implemented, and this bill actually implements 12 of those recommendations to combat money laundering — including, very importantly, giving the BCFSA rule-making powers over the conduct of the mortgage service industry.

Now we look at the act. It was actually developed in the 1970s. While there have been some amendments over the years, technology has changed, and we need to bring a modern framework to this act, as the sector has evolved. Very important in the Cullen commission final report — they found that anyone who lends money on a security of a mortgage presents a money-laundering risk. If we don’t address that real issue, money laundering can continue to flourish in our province.

What’s very important in this act is including a mortgage-lender licence, allowing the British Columbia Financial Services Authority to regulate mortgage lenders who are not otherwise in the mortgage services business and who are not currently required to register. This framework for this legislation is modelled after the Real Estate Services Act, and this aligns the work that’s been done to ensure that the BCFSA has a consistent enforcement and regulatory regime moving forward.

[4:50 p.m.]

Of course, licensing fees and penalties will also align with the Real Estate Services Act, which is very helpful in terms of ensuring certainty in the real estate sector and making sure that the BCFSA has consistency in terms of regulatory authority and how they do business.

Now, what’s very important is penalties. If someone contravenes this act, the penalties are high, starting with a maximum administrative penalty of $100,000. Individuals or corporations with more than one offence conviction could face a penalty of up to $2.5 million. This sends a strong signal to people who want to launder money in our province, and this is about eliminating money laundering.

Part of the recommendations, 12 of them, is to continue to do this work, and this is part of that important work. What will the act do? It will replace the Mortgage Brokers Act with an effective, efficient and modern regulatory framework. It will enhance consumer protection, which is really important, harmonize laws across the real estate sector in British Columbia and help encourage responsible business conduct. It will give administrative enforcement and rule-making powers to the B.C. Financial Services Authority as the sole regulator for real estate in the sector.

Now, the colleague from West Vancouver–Capilano had mentioned: “Well, this is just another regulatory burden, and we shouldn’t be doing that.”

But I look at Blair Morrison, who’s the CEO and registrar of mortgage brokers of the BCFSA. He says: “The new act will provide BCFSA with greater tools to enhance the regulation of mortgage broker services in British Columbia. The increased powers to investigate, discipline, license and set standards of conduct will ultimately mean better protection for both borrowers and lenders, as well as enabling BCFSA to better address emerging products and services in the future.”

So we have support from the organization that is going to be overseeing this.

Before the act is brought into effect, we’ll be working with the BCFSA in order to make sure that the details work with the industry. It’s very important. We’ll ensure that, during that transition period, businesses and individuals who have to register under the act can take those steps that are necessary to become licensed. This is very important.

Again, it’s one thing to say that this is just an act to have regulation. But really, as I mentioned earlier, money laundering is not a victimless crime, and it has had huge impacts on our society. Our government actually ran on that. In 2017, it was one of our promises: to take significant action on money laundering in this province. Of course, the previous government, the B.C. Liberal government, failed to stop money laundering as it emerged as a threat.

The Cullen commission actually came to the conclusion that there was a lack of will that was exhibited by the now members of the opposition.

From the actual commission: “What was lacking prior to 2018 was not the identification of an appropriate policy response but rather the will, on the part of both government and industry, to take on the kind of decisive action necessary to effectively respond to the problem.” That was on page 15.

This lack of will was very, very clear for anyone who was watching what was going on.

It’s interesting, though, that the new Leader of the Opposition, when forced to apologize for his former government’s role, said: “Hey, I wasn’t around then. Nothing to do with me. Nothing to see here.” But the reality is that he was in government at that time. Following the emergence of the Gaming Commission, in 2008, money laundering in the gaming industry persisted. Despite the leader’s comments, the government was, for five to ten years, delaying, as money laundering ramped up in this province.

During that time, the BCLC CEO, Michael Graydon sent emails to his staff indicating that the government was pressuring the BCLC to increase revenue, in fact: “It’s imperative that your division comes in with these numbers or better. As I’ve said before, Victoria is not keen to pay incentives if budgets are not met.” In other words: “Hey, money’s coming in. Let’s turn a blind eye.”

[4:55 p.m.]

Let’s not forget what happens when you turn a blind eye to crimes like money laundering. The opioid crisis increases. Real estate goes up. People suffer; their lives suffer. This impacted people on the ground; this impacts people to this day. It continues to impact people to this day, because the impacts were done over a long period of time.

If you’re so obsessed with bottom lines, making money for your budget and allowing this criminal activity to happen, that’s a serious, serious problem. That happened under the past government. Our government is absolutely committed to tackling this important work. This act deals with 12 of the recommendations that were made to fight money laundering in this province.

We are committed to continue this important work to fight money laundering. This will allow licensing, regulation and penalties, giving the BCFSA the tools to ensure that the real estate market keeps money laundering out of our province.

A. Mercier: It’s an honour and a privilege to stand up here today and to speak to the Mortgage Services Act. I’d like to thank three of the previous speakers: my friends the member for Maple Ridge–Mission, the member for Richmond South Centre and the member for Vancouver–False Creek for laying out the rationale for this act so eloquently.

This act is about protecting British Columbians when they make the single most important purchase of their lives: when they buy a home. Mr. Speaker, I know that like you, I’m a millennial. When I get together with my friends, and my wife and I get together with our friends, home ownership is a topic that’s first and foremost on people’s minds — housing affordability, availability and, frankly, the purchase price. It’s no secret to anybody that there has been huge upward pressure on the price of homes in British Columbia and across Canada.

Part of that has to do with policy failure on the side of the previous government, now the opposition, but a part of that is due to several structural problems in the housing market. The bottom line is that homes are expensive, and borrowing a couple of hundred thousand dollars or $1 million or more is, for most people, the single biggest and most important sum of money they will ever borrow. They have the right, and they ought to have the right, to be able to trust the people that they are borrowing from and the people that are arranging that lending.

You do not borrow $1 million from someone unless you trust them and unless you trust that institution. The need to make sure that there are rules in place so that lending happens credibly and aboveboard attracts a significant public interest and, therefore, a regulatory interest. There are over 5,000 registered brokers and submortgage brokers here in British Columbia. They’re a significant part of the market: 30 percent of all residential mortgages in Canada are made up by this segment of the market. British Columbians deserve better consumer protection and more transparency in the real estate sector, particularly here.

By providing a stronger framework for the regulation of mortgage brokers, the province is giving both borrowers and investors peace of mind. We need to provide the B.C. Financial Services Authority with the tools to regulate the financial services industry we find ourselves in today, which includes borrowing for homes, while guiding industry to adopt responsible business practices into the future. We want to make sure, as government, that B.C. has effective consumer protection legislation and world-leading protections against money laundering. That’s why we’re creating the Mortgage Services Act, which is an essential part of that.

It really provides a modern framework to address many of the issues that came out of the Cullen commission’s recommendations to combat money laundering, particularly by giving the BCFSA rule-making powers over conduct in the mortgage services industry. I’m going to talk about that in a second, but you may remember that the Cullen commission was an inquiry into money laundering, which was needed to clean up the mess the previous government left behind for us — the B.C. Liberals, or the United Against Liberals, or the Anything But Liberals, or the United Liberal Party, or whatever they’re going to call themselves in the next election.

Making sure that we have rules of conduct for those lending money in the mortgage services industry is critically important. Look, I come from a regulated profession. So do many others in this House. The member for Maple Ridge–Mission, who just spoke, like me, is a lawyer.

[5:00 p.m.]

I would give the analogy of sitting down to borrow $1 million or more for the price of a home to requiring a very similar level of trust that you need to get legal advice at a critical juncture in your life. Whether that be the purchase of real estate, a corporate transaction that’s gone wrong, criminal accusations or otherwise, the fact of the matter is that you need to know you can trust the person giving you advice, because you are dealing with someone in an area where you do not have specialized knowledge and where they are holding themselves out as having specialized knowledge.

For lawyers, we have the Law Society, which is a licensing body where we are licensed, where we have requirements to be licensed and where the penalties if we violate the codes of conduct that are in place for us are very stiff, including disbarment but also fines and a whole range of other penalties. So I think this is an appropriate framework to put into place here.

It’s important to understand what the act does. This will improve the regulation of mortgage brokers, lenders and administrators by replacing the outdated Mortgage Brokers Act with the new Mortgage Services Act.

The new act will give B.C.’s financial services sector regulator, the BCFSA, or the B.C. Financial Services Authority — I’m just going to call it the BCFSA, for the most part, going forward — the ability to develop rules for licensing and licensee conduct, which was one of the recommendations from the Cullen commission. It will require licensing, with limited exemptions, to strengthen regulatory compliance and will provide BCFSA with new powers to set those codes of conduct, which I talked about, and enhance disclosure and reporting obligations.

This law is not just about codes of conduct and standards; it’s also about reporting obligations and disciplinary procedures. In that way, it sets up an entire regulatory regime around licensing.

By leveraging the licensing and penalties framework of the Real Estate Services Act, the new, modern Mortgage Services Act is aimed at improving protection for borrowers and lenders in today’s market and allowing for changes in the future. The BCFSA will now have administrative, enforcement, which is what I’m talking about there, and rule-making powers over the industry as non-traditional lenders emerge and more people turn to mortgage brokers and online technology to arrange residential mortgages.

I think that was summed up very well by my friend the member from Richmond, who spoke about the emergence of brokers in his community. What that means is…. People become either incredibly desperate to borrow or pressured to borrow from non-traditional lenders because they have trouble borrowing from banks.

The reality of it is…. Most people just want to own a home and have a place to live and have a place for their families to grow and be a part of a community. We need to help facilitate that and make sure that we’re not allowing bad-faith transactions to take place, which really put our whole community and our province at risk.

One of the pending changes is an increase to fines for contravening the act, starting with a new administrative penalty of as much as $100,000. That’s the administrative penalty. Disciplinary penalties will be increased from a maximum of $50,000 to $500,000, and individuals or corporations with more than one conviction could face a penalty of as much as $2.5 million, increased from a maximum of $200,000. That’s important. When you’re dealing with large sums being made off of mortgage lending, you want to make sure that the punishment fits the crime and that it creates the proper disincentive to errant market behaviour.

Like I said, Mr. Speaker, this is an incredibly important act. I think it’s really cool. So what I’m going to do is…. I would like to turn to the act and read it. I think there’s a lot in this act that’s important for the consideration of this House and the deliberations, going forward.

I direct you — this is Bill 29, Mortgage Services Act — to page 19, division 5, “Duties,” and the “Duty to act in good faith,” section 31 of the act. I’m going to read that out, section 31: “Duty to act in good faith. A licensee must act fairly, honestly and in good faith when providing mortgage services.”

[5:05 p.m.]

Now, maybe you’re asking yourself: what’s a licensee? Well, if you turn to page 4, part 1, definitions, section 1, you’ll find that “licensee” means a person who holds a licence. It’s someone who’s licensed under this regime. They must act fairly, honestly and in good faith when providing mortgage services. That is incredibly important in terms of attracting various procedural protections to the standard of conduct in these transactions.

I want to turn to the next two sections, sections 34 and 35, which are fairly illuminating.

Section 34. Of course, this is still in division 5, which is the duties. That’s really talking about the duties of those who are licensed under the act. A good portion of the act, which I won’t read out because it’s very dry — of course, these sections aren’t — sets up that licensing framework, sets up the superintendent and various administrative, tribunal-type procedures.

I really want to get to the substantive heart of it and focus less on the administrative procedure and look at section 34, division 5, “Duties,” “Wrongful taking.”

“A licensee, or an unlicensed person who is providing mortgage services despite not being licensed as required by section 3 and who is not exempted from that requirement….” Because of course, in certain instances, there are exemptions, and I’m sure that will be canvassed by another member of this House. I don’t intend necessarily to go into that.

But “who is not exempted from that requirement must not do any of the following when providing mortgage services: (a) misappropriate or wrongfully convert money or other property that was received by the licensee or the unlicensed person in relation to the mortgage services; (b) intentionally fail to account for or pay over, within a reasonable time, any money or other property that, in relation to the mortgage services, (i) was received by the licensee or the unlicensed person, and (ii) belongs to one or more other persons.”

So pretty clear and strict rules there.

It goes on, in section 35 — of course, this is on the next page of the bill, “Deceptive dealing.” “A licensee, or an unlicensed person who is providing mortgage services despite not being licensed as required by section 3 and who is not exempted from that requirement, must not do any of the following when providing mortgage services: (a) make an intentional misrepresentation, by word or conduct or in any other manner, of a material fact in relation to mortgage services, or make an intentional omission to disclose such a material fact.”

That is a high onus on conduct, which is really putting the meat on the bones of good faith and fairness in terms of conduct here, making sure that not only do you not make an intentional misrepresentation but that you can’t get away from it and squirrel away from it on a thin defence by saying: “Look, you can’t do it in any manner, word, conduct or any other manner, and you can’t intentionally omit a material fact, either.”

“(b) engage in a course of conduct or business that is intended to deceive another person about the nature of the mortgage services; (c) make a representation or engage in any conduct that has the capability, tendency or effect of deceiving or misleading another person in relation to mortgage services; (d) make a promise or representation about the future that is beyond reasonable expectation” — reasonable expectation, Mr. Speaker — “and not made in good faith.”

I think this is an incredibly important provision. What this really targets is errant…. I think we can say that most people who are operating in good faith ought not to attract this behaviour in the first place. This really targets errant, fly-by-night operators. It’s really inarguable here, I think. It is really inarguable to say that this is anything other than meeting the public good in terms of that. It’s very clear, and it’s very clearly laid out.

Now, I’d like to skip ahead. There’s a lot of good stuff in the following sections about investigations and complaints about licensees and consent orders that is absolutely scintillating to read and spend time with. I really want to get into “Discipline orders,” section 45. I’m going to read that section out just in a moment.

[5:10 p.m.]

This really applies, in many ways, to some powers of the superintendent created by this act, in terms of regulating licensees who are operating under this administra­tive regime.

So 45, “Discipline orders,” section 45(1): “In this section, ‘contravention’ means an act or omission that is the subject of the determination under subsection 2 (a) that the licensee has committed misconduct or conduct unbecoming a licensee.”

Once again there, we have a broad catch-all to make sure that errant behaviour doesn’t escape by having language that is, of course, too strict for conduct unbecoming of a licensee.

“(2) After a discipline hearing, the superintendent must (a) act under this section if the superintendent determines that the licensee has committed misconduct or conduct unbecoming a licensee, or (b) in any other case, dismiss the matter.”

This is subsection (3): “If subsection (2) (a) applies, the superintendent must, by order, do one or more of the following.” They must — that’s mandatory language, Mr. Speaker — do one or, potentially, more. They’re not limited.

“(a) reprimand the licensee; (b) suspend the licensee’s licence for the period of time the superintendent considers appropriate or until specified conditions are fulfilled; (c) cancel the licensee’s licence.” That, of course, boots you out of the industry.

“(d) impose restrictions or conditions on the licensee’s licence or vary any restrictions or conditions applicable to the licence.” We’re going to start to get pretty interesting here, in a couple of seconds, as I read through this.

“(e) require the licensee to cease or to carry out any specified activity related to the licensee’s mortgage business; (f) require the licensee to enrol in and complete a course of studies or training specified in the order.” That’s really about not your errant actor who is engaging in bad-faith behaviour. That’s really more of a case where you have someone that may have a gap in their knowledge and that may be able, through education, to come into compliance.

“(g) prohibit the licensee from applying for a licence for a specified period of time or until specified conditions are fulfilled; (h) require the licensee to pay amounts in accordance with section 46 (1) and (2) [recovery of enforcement expenses]; (i) require the licensee” — and this is where the discipline penalties come in — “to pay a discipline penalty in the amount of (i) not more than $500,000, in the case of a mortgage brokerage or former mortgage brokerage.”

You may be a former mortgage broker by the time you’re through with this list of penalties. “…or (ii) not more than $250,000, in any other case; (j) require the licensee to pay an additional penalty up to the amount of the remuneration accepted by the licensee for the mortgage services in respect of which the contravention occurred.”

Of course, that just seems like basic fairness.

Subsection 45(4): “A discipline penalty…under subsection (3) (i) may be imposed for each contravention.” A bad actor can’t get off the hook by paying once. They’re going to pay…. They may be forced to pay, depending on the circumstances, each and every single time.

There’s more here, in terms of section 45, but I want to turn now to section 63 of the act. Just kind of noting the time I have, I want to make sure to use it as expeditiously as possible here, for the benefit of this debate. I’m going to turn to section 63 — which is, of course, the first section of part 4 of the act, on the B.C. Financial Services Authority. This is really about the rules of the authority.

I might speak to this one, maybe in some broad terms. I might come back to subsections (1) and (2). What I’ll say…. I’ll read subsection (1), because it’s short. So 63(1): “Subject to section 64, the Authority may make rules that the Authority considers necessary or advisable (a) respecting licensing, or (b) regulating licensees in relation to the provision of mortgage services.” This is the section that names the BCFSA, the authority, as defined under the act, as the primary regulatory body here.

[5:15 p.m.]

Now, section (2) — what it does is it sets out the authority’s ability to make rules prescribing the terms of licensing, levels and categories within mortgage broker licences, providing for the issue of temporary licences under section 19 and a whole variety of conditions and restrictions and relationships they may regulate, all of which ultimately serve the public good.

I think it’s just inarguable, as a necessary part of setting up this administrative regime to really protect consumers, like my friends, who all want to buy houses and may find themselves borrowing a lot of money. They should have faith and trust in that process.

What I really wanted to get to…. Of course, we are reading section 63. It’s a very long section, so I had to go back and look at the number, subsection (3). This is where, I think, the rubber hits the road in terms of the authority’s powers in a substantive context.

“Without limiting subsection (1) or (2)” — which are the sections I’ve just said; this specifies, but does not limit the power of the authority — “but subject to section 64” — okay, section 64 is important — “the Authority may make rules as follows: (a) establishing conditions and restrictions applicable to mortgage brokerages respecting the involvement of the following individuals in the mortgage brokerage’s operations.”

And the following individuals being: “(i) a partner, or a director, officer or shareholder of a corporation that is a partner, in the case of a mortgage brokerage that is a partnership; (ii) a director, officer or shareholder of the corporation, in the case of a mortgage brokerage that is a corporation; (iii) a sole proprietor, in the case of a sole proprietorship.”

That makes it evident. We’re basically going through the forms of business associations here. “(iv) an individual who directly or indirectly controls the mortgage brokerage, in any other case.” That’s your basic control test. I would presume that that would be with the BCFSA and would apply to that.

But really, the rubber is hitting the road here. Subsection (3)(b), “establishing a code of ethics for licensees,” is a critically important part of this act. In addition to the general duty of good faith — duty to act in good faith, fairness and, functionally, honesty — establishing a specific code of ethics for licensees. There’s a lot of heavy lifting involved in that type of work, which is why you won’t see it all specified in legislation. That will be prescribed in another form, as it should be.

It goes on here to lay out several other necessary powers.

What I’d like to do is to go over to offences, so I’ll direct you to page 43 of the act, part 5, "General,” division 1, “Offences.” I know that for those listening to my speech right now, listening to the debate, this is what’s really on their mind and what they want to hear about, so I’m going to go directly into section 66(1) under offences.

“A person who does any of the following commits an offence: (a) contravenes section 3 (1),” and that’s the obligation that a license is required for carrying on the business of providing mortgage services. You cannot enter into mortgage services without a licence.

“(b) contravenes section 3 (2) [licence required – indi­vidual providing mortgage services for remuneration]” — as opposed to a business, an individual; “(c) contravenes section 3 (3) [licence required – mortgage lending]; (d) con­travenes section 33 (1) [maintaining trust account with­out authorization]; (e) contravenes section 34” — we went over that — “[wrongful taking].”

Subsequently we went over the next section as well, sub­section (f): “contravenes section 35” — which we’ll remember that we spoke about — “[deceptive dealing]; (g) contravenes section 39 (4) [interference with investigation].” That is a serious thing, not one that should be taken lightly, and that is why it is categorized in the act as an offence.

“(h) fails to comply with an order of the superintendent; (i) makes or allows to be made….” And this is in terms of failing to comply with an order of the superintendent; this is a subsection of that provision. “(i) makes or allows to be made a false or misleading statement in a record that is required or authorized to be provided, submitted, filed, delivered or produced under this Act.”

[5:20 p.m.]

What, you may be asking, is a false or misleading statement in this context? Well, I will direct you once again to page 4 in the definition section — part 1, “Introductory provisions,” of this act. Section 1: “‘False or misleading statement’ includes an omission in relation to information that is required or authorized or provided under this Act.” Once again, you’re not getting off scot-free for not saying anything that you should have said.

“(j) contravenes a provision of the rules, the contravention of which is prescribed to be an offence.”

Now, importantly, it’s one thing to have offences, but you need a punishment that fits the crime. So we’ve outlined what the offences are. What we need to know is: what are the penalties for committing those offences? You’ll find those in section 67 of this act.

Subsection 67(1): “A corporation that commits an offence under section 66 is liable, (a) on a first conviction, to a fine of not more than $1.25 million….” I don’t know about you, Mr. Speaker, but I don’t have $1.25 million lying around. That is a lot of money, and that is an appropriate ceiling for that offence, considering the infractions we’re considering here.

And (b): “on each subsequent conviction, to a fine of not more than $2.5 million.” This is important too, in each subsequent conviction — that multiple offences are going to attract multiple penalties or may attract multiple penalties. We need to make sure, given the sums of money that are at play here for individuals, that we’re really capturing that behaviour.

Subsection 67(2). What this says…. Before that it says, of course, a corporation: “An individual who commits an offence under section 66 is liable, (a) on a first conviction, to a fine of not more than $1.25 million or to imprisonment for not more than 2 years, or to both, and (b) on each subsequent conviction, to a fine of not more than $2.5 million or to imprisonment for not more than 2 years, or to both.” These are serious offences that, in addition to the dollar value that they attract, also attract, rightfully I think, potentially, prison time, given the scale of the way this impacts folks.

Now, I just want to move more towards my closing here. There’s a section here that’s been referenced multiple times that I think, to clarify for the record, I’m going to read into it, because I do think it’s important to understand the full context of the bill. That’s part 2, “Licensing,” division 1, “Licence requirements,” “Requirement for a licence to provide mortgage services.” That’s section 3.

“(1) A person must not carry on the business of providing mortgage services unless the person is (a) licensed under this Part as a mort­gage brokerage to carry on the business of providing those mortgage services, or (b) exempted by section 4 or the regulations from the requirement to be licensed under this Part as a mortgage brokerage.

“(2) An individual must not provide mortgage services for direct or indirect remuneration, as an employee or otherwise, unless the individual is (a) licensed under this Part as a principal broker or mortgage broker to provide those mortgage services and is acting on behalf of a mortgage brokerage, or (b) exempted by section 4 or the regulations from the requirement to be licensed under this Part as a principal broker or mortgage broker.”

That’s pretty straightforward, I think, in terms of something that is knowable and that can be then complied with by folks within industry. But:

“(3) A person must not provide the mortgage service of mortgage lending unless the person is (a) licensed under this Part as a mortgage lender, (b) licensed under this Part as a mortgage brokerage to carry on the business of providing that mortgage service, (c) licensed under this Part as a principal broker or mortgage broker to provide that mortgage service and is acting on behalf of a mortgage brokerage, or (d) exempted by section 4 or the regulations from the requirement to be licensed under this Part as a mortgage lender.”

Like I said, Mr. Speaker, I wanted to speak at length to this, although I didn’t want to necessarily get wound up in the technical details of the bill. So I’ve decided to go more into the substantive portions rather than the compliance regime as set out by administrative agencies, and so forth.

[5:25 p.m.]

What you’ll find, I think, from myself and my colleagues, is that we’re standing up and speaking about this because we’re passionate about helping people. And what I would suggest is that the people speaking to this bill are the people that care about protecting British Columbians from potentially predatory mortgage brokers. I think that’s a basic litmus test that voters should look for, in terms of who stands up for what they believe in or what’s actually in their interest.

This is a good act. It’s about protecting British Colum­bians in the most important purchase of their lives. When I sit down and I think and I look at…. I’m a renter, and I’m benefiting from the speculation and vacancy tax of…. My landlord rents the place out in order to avoid that tax. But my wife and I…. We look at property all the time. When I think of borrowing those sums of money in order to purchase something, I mean, I feel, frankly, sick over it. It’s like buying a new car and then staying up the entire night after and thinking: “Did I make the right decision?”

By orders of magnitude, this is an incredibly important purchase in people’s lives. It’s an incredibly large sum, and we need to make sure that there is sufficient consumer protection, relevant to the level of public trust that this business attracts.

Deputy Speaker: Member for Richmond-Queensborough.

A. Singh: No takers on that side so far? All right.

In staying with the tradition of lawyers, I will also read through the…. No, I will not read through the bill today. I think my colleague has done a phenomenal job there of explaining the really important sections of that bill, of this Mortgage Services Act.

We spoke earlier today about the Cannabis Control and Licensing Amendment Act, and this Mortgage Services Act sort of falls right into that sort of realm as well, the realm of…. I spoke earlier. This is the second time I’ll be able to speak about Al Capone. Al Capone and organized crime and money laundering — that really is the crux of this. The crux of this bill is to protect consumers from that. It comes from the Cullen commission’s recommendations.

Great consumer protection advocate Ralph Nader has a quote that goes something like: “Your best teacher is the last mistake that you’ve dealt with.” And that really is. So it’s not our mistake. It’s a mistake of our friends on the other side there, during their reign, that we have to deal with, and that’s what this bill is really addressing.

It enhances consumer protection under legislation that has been amended a few times, but really, frankly, is quite old — made in the ’70s for a very different British Columbia, a very different climate than we exist in now. So the province is essentially improving the regulation. What does this bill do? It’s improving the regulation of mortgage brokers, lenders and administrators by replacing that outdated Mortgage Brokers Act with a new Mortgage Services Act.

This new act will give B.C.’s financial services sector regulator, the B.C. Financial Services Authority — we’ll abbreviate it to BCFSA for the next little while — the ability to develop rules for licensing and licensee conduct. It will give them that flexibility to be able to administer mortgage brokers and lenders in a manner that protects consumers, protects you and me, protects the average person out there. It will provide more transparency in the mortgage broker industry.

British Columbians deserve better consumer protection and more transparency in the real estate sector. This is one of the sectors that was specifically outlined in the Cullen commission that was rife with money laundering. When we formed government, we launched an inquiry into that. My friend spoke about it earlier. By providing a stronger framework for the regulation of mortgage brokers, the province and the government is giving both borrowers and, more importantly, investors peace of mind. As I think my friend from Richmond South Centre said, this is probably the largest investment a person will make ever in their life. With such large sums of money comes rife the opportunity to do deviant things.

[5:30 p.m.]

Again, I’ll go back to Al Capone. With the prohibition of alcohol, it presented an opportunity for them to take advantage of that. This is what happens when you have large money involved and you have profits involved. This bill is being passed to address those gaps that we have.

We wanted to make sure that British Columbia has effective consumer protection legislation and that this legislation is world leading against money laundering. So we created the Mortgage Services Act, which is an essential part of that whole regime. The act, which we spoke about earlier today, on cannabis was also part of that regime — targeting illicit activity and taking money out of out of illegal hands.

The Mortgage Services Act provides a modern framework. Again, the original act was quite old. I think 1972 was when it was originally made. This act now will provide a modern framework to address many of the Cullen commission’s recommendations to combat money laundering, including by giving the BCFSA rule-making powers over conduct in the mortgage service industry.

As my friend alluded to earlier, many other professions already have that — the Law Society and the colleges of pharmacists, dentals, physicians and surgeons, amongst many others. It just makes complete sense to extend it out to mortgage brokers and lenders, who deal with probably the largest investment people are ever going to make in their lives.

You want to make sure that people are protected when they’re making that investment. This is their life savings. This is money that they’ve inherited from their parents, or this is money that they’ve worked really hard all their lives to save up to make this investment.

As we’ve seen, the effect of not having consumer protection legislation and the effect of not having a government that was concerned about consumer protection…. What that created was this Wild West of money laundering and speculation that drove housing prices and that put us in the position that we are in today.

Again, what is the purpose of this proposed legislation? The proposed legislation, again, as I said, will replace the old Mortgage Brokers Act with a much more effective, efficient and modern regulatory framework, the Mortgage Services Act. A slight name change. It not only deals with mortgage brokers, per se, but lenders and private lenders and others as well. It’ll enhance consumer protection, and it’ll harmonize laws across the real estate sector in British Columbia. It’ll help encourage responsible business conduct in that sector.

It will give administrative enforcement and rule-making powers to the BCFSA as the sole regulator for the real estate sector. Really important that they be able to regulate that whole sector, that they be able to see what the problems are and that they be able to be flexible enough to provide a solution for that. Again, learn from the mistakes of the past.

A new act will also begin to address several recommendations from the Cullen commission report on money laundering in British Columbia. This is going to have, obviously, quite a significant impact on mortgage brokers or lenders. And I’ll say this. Most mortgage brokers and lenders are good. They welcome this. This will not really have as much of an impact on them. It will, however, have an impact on those ones that are nefarious, which is exactly the point of this legislation.

People who are currently required to register under the Mortgage Brokers Act will need to be licensed under this new act.

The new legislation will also introduce penalties consistent with the discipline process and procedures of the Real Estate Services Act. We already have mechanisms that have been there before. We’re replicating that, learning from what we know from the past.

There are some exemptions. Some people are…. Like the existing act, anyone already subject to provincial or federal regulation will be exempt from licensing, as is already currently the case. So no difference there.

[5:35 p.m.]

Who would those people be? This would include things like banks and credit unions, their employees, insurance companies and lawyers providing incidental mortgage services. The reason for that is…. Under their own licensing regulations, there are already protections. The consumer protections that we’re offering here already exist for banks. Those already exist for lawyers. Those already exist for credit unions, insurance companies. So no point burdening them with being licensed again.

This new act will be brought into force soon. Before the act is brought into force, we’ll be working with the B.C. Financial Services Authority to develop the actual details of the regulations. That being said, we’re going to ensure that there’s ample time for people to learn about their responsibilities under the new act so that they’re fully prepared. Again, for those that are non-nefarious, this will be something that’s welcomed.

It will also ensure that there’s a transition period for businesses and individuals who are already registered under the act so they can take the necessary steps to become licensed. They’ve already registered. They’ve done the right thing in the past. We’re giving them time to do the right thing and get licensed under the new act.

We don’t have that timeline yet. We’ll share the timeline as soon as we can, after the necessary steps and consultation with the BCFSA. The earliest estimated timeline for when we could see changes implemented is really late next year, late 2023.

The framework for this legislation is modelled after the Real Estate Services Act. It’s nothing really too dramatic or different. People have already seen this. The licensing fees and penalties will align with those fees and penalties that are already in place for others in the real estate sector — again, to promote and push consumer protection.

Although the Mortgage Brokers Act has been around since the ’70s, there have been updates over the years. Why wasn’t this done sooner? With rapidly changing technology, we knew we needed a new, modern framework that could adapt to an evolving sector and that could hopefully serve the province for the next decade or two. Updating the legislation was a priority. The Cullen commission and the Expert Panel on Money Laundering in B.C. Real Estate underlined the need to take action on curbing money laundering in the province. The real estate sector formed a really large part of that.

If you do contravene the act, what do those penalties look like? They’re significant — my friend alluded to it earlier — starting with the maximum administrative penalty of $100,000. Individuals or corporations with more than one offence conviction could face a penalty of up to $2.5 million. It’s substantial, again. We’re committed to taking strong actions — and these penalties reflect that — to help protect the people of British Columbia and eliminate dirty money from our communities, our economy and, frankly, our homes. These penalties may seem high, but they’re necessary for that deterrent effect.

We respect that the members of the mortgage service industry who consulted…. Many of them consulted with us on this legislation, and our government is very appreciative of the feedback that we got from them. These penalties are designed to be significant. The impact, not only the financial impact but the social impact of letting things like money laundering go ahead, of allowing the housing market to go crazy…. Those social impacts are significant.

We have seen the effects of those social impacts in our society. There are ties between money laundering and the opioid crisis. We see deaths every day from the poisoned drug supply that we have in this province. There are direct ties to money laundering from that. So again, the social impacts are great. Hence the penalties are great.

We need to do everything that we can to enhance consumer protection. That’s what we’re here for. We’re here to serve the people of British Columbia, and that’s what this does. It protects the people of British Columbia, especially in the real estate sector, where they buy and where they purchase their homes, a place where they’re going to be raising their families. This act works towards — in conjunction with many of our other legislative pieces that we’ve passed and the other things that we’ve done — eliminating dirty money from our communities, our economy and, again, from our homes.

Not only are there penalties there; there’s also a disci­pline proceeding, that whole regime that comes with this. We modelled the Mortgage Services Act discipline model after the Real Estate Services Act, because we have a model that works. We’ve seen it in action. It’s a model that works.

[5:40 p.m.]

What it does is it harmonizes the legislation in that sphere, and it ensures consistency across that whole industry — across the real estate industry.

The whole crux of this legislation is to protect consumers, to protect the people of British Columbia, and we want to make sure that this legislation does exactly what it’s intended to do. This necessarily means working in close consultation with the industry to modernize this legislation, which gives the province’s financial services regulator rule-making powers to regulate the industry. So you’ll see an overarching services act, not a small piece of legislation.

I will refer to it really quickly — 105 sections, so quite substantial. But there are a lot of details that are left, there’s a lot of flexibility that’s left to the B.C. Financial Services Authority. There’s a reason for that: so that they can be flexible and they can react to the situations that come in front of them.

The key to the success of this legislation is close work with the B.C. Financial Services Authority. We’re going to develop the regulations and rules, following consultation and collaboration with the industry and the Financial Services Authority, before seeking final approval. Again, not unusual. Many pieces of legislation have an overarching direction, and the details are done by regulation.

During the consultation, the issue of private lenders and private mortgage lenders also came up. The Cullen commission, in its recommendation, recommended a separate piece of legislation to deal with private mortgage lenders. This act includes private lenders. We thought that it seemed to make more sense to streamline things to include anyone who offers mortgage services in one encompassing piece of legislation. Hence the name change — not the mortgage brokers act but the Mortgage Services Act. So if you provide a service that looks, walks and feels like a mortgage, you’re covered by this act.

What it also does…. The licensing system that we have enables the BCFSA to distinguish that private mortgage, private lenders from banking lenders or others, so it leaves that nitty-gritty up to the regulator, which again is not unusual.

BCFSA’s rule-making power includes setting different requirements for different types of licences. They can be much more flexible and much more responsive to the industry’s requirements on a day-to-day basis that way. Any private lender who’s in the business of lending, as I said, and had to be registered in the previous act will need to be licensed under the Mortgage Services Act.

So you provide money that looks like a mortgage, feels like a mortgage, smells like a mortgage, flies like a mortgage. You’re in that industry. You will have to be licensed under this act. Even if the lender wasn’t required to be registered under the previous act, if you fall within those definitions, you will need to be licensed under the new legislation. So that wiggle room where money laundering could come in, where nefarious actors could come in — that has been taken away.

Why do we license mortgage lenders? Sort of an obvious answer to that, but we’ll go back to the Cullen commission. The Cullen commission’s final report found that anyone who lends money on security of a mortgage presents a significant money-laundering risk, and we saw that in this province. Including a mortgage lender license allows the BCFSA to regulate mortgage lenders who are not otherwise in the mortgage services businesses and that are not currently required to be registered.

Like I said earlier, banks, lawyers, insurance companies, their employees…. They already have licensing requirements and consumer protection built into their own administrative either regulatory bodies or their licences. This extends it out to anyone who lends money for a real estate purpose.

This act is completely consistent with the Cullen commission’s recommendations. The commission made 17 recommendations related to the regulation of mortgage brokers and two recommendations dealing with private lenders. Several recommendations that can be incorporated into the legislation are included either directly in the legislation or indirectly through the rule-making authority of the BCFSA.

[5:45 p.m.]

Some recommendations, we found, were outside the scope of this legislation. But what this offers is a comprehensive consumer protection package that will serve British Columbians, we’re hoping, for the next while, for the next few decades.

This act incorporates the Cullen commission’s recommendations directly by establishing licensing categories and levels to allow regulation and set different requirements for mortgage lenders, mortgage brokers, principal brokers, private lenders. It increases financial penalties, including disgorgement, to align with its sister act, the Real Estate Services Act. It amends the appeal procedures, making them more consistent. It grants the BCFSA rule-making powers over licensing and licensee conduct.

It also indirectly incorporates recommendations of the Cullen commission by giving the BCFSA the power to set licence standards and education requirements, including reporting requirements, business practice standards, generally accepted business standards — things like that.

As I said earlier, some of the recommendations for the regulation of mortgage brokers fell outside the scope of this legislation. Some of that has been remedied by giving the BCFSA the rule-making ability to address some of that. But our work to improve consumer protection and eliminate dirty money from our communities and our economy began before the introduction of this new legislation, and it will continue after it’s enacted.

Again, as I said, you have to see this as part of a package with other things like the bill that we introduced earlier today, that we spoke about earlier today, the Cannabis Control and Licensing Amendment Act, all directed to control crime. Money laundering is one of the worst crimes here. All are directed to control crime, to take illicit money out of their hands.

Why do we need the Mortgage Services Act? The Cullen commission made it quite clear. The financial services market has changed profoundly since the original act, the Mortgage Brokers Act, was first introduced in the ’70s. The type of mortgage products that are available…. There are numerous amounts of them now. They’ve also changed.

We’ve also seen the emergence of non-traditional mortgage lenders as well as an increased role of mortgage brokers in the industry. You know, 25 or 30 years ago mortgage brokers were a very small, if not almost non­existent, part of this industry. Over the last 20, 30 years, you’ve seen that many mortgages are done now, regularly, through mortgage brokers.

In addition, technology has changed dramatically over those years. People are now using online technology to set up their residential mortgages. We’ve all seen those ads where you see the real estate agent and the young family in a house. She’s like: “Well, you better bid on this right away.” They’re like: “Our bank hasn’t approved our mortgage yet.” And she’s like: “Oh. Well, there’s this online place that’ll approve your mortgage right away.”

So technology has changed; society has changed. People are now increasingly using online technology to get preapprovals and to set up their residential mortgages, and the old act had no real teeth or no real way of dealing with that.

The expert panel on combatting money laundering in B.C. real estate and the Cullen commission both recommended updating our mortgage services legislation to combat money laundering which, until 2017, was a mas­sive problem in this province. This act also addresses these issues by establishing an effective, efficient and modern regulatory framework for today’s real estate sector and for the future — like I said, hopefully for decades to come. It also gives the BCFSA that rule-making ability so that it can be flexible as technology changes and as mortgage instruments change over time.

This impacts a significant amount of people. There are over 5,000 registered mortgage brokers and submortgage brokers in British Columbia, responsible for arranging almost one-third of residential mortgages at this point. This act will encompass all of them.

[5:50 p.m.]

Most other jurisdictions in Canada that are similar to B.C. introduced mortgage broker legislation and did the same thing that we did. They introduced legislation in the ’70s and have since reviewed and updated their acts, as we did. B.C., despite having made a few amendments to our legislation over the years, had yet to do a full update.

We have the advantage of having the Cullen commission and its recommendations, and hence the new Mortgage Services Act, which gives broad rule-making power to the BCFSA and will ensure that B.C.’s legislation is consistent not only with other jurisdictions in Canada but with industry leaders all around the world and has the ability and the flexibility to change and to adapt in the future.

It’s not a hastily constructed piece of legislation. We received submissions from 43 different stakeholders: from individuals, corporations, other groups and the three major mortgage broker associations — Mortgage Professionals Canada, the Mortgage Brokers Association of British Columbia and the B.C. MIC Managers Association. They all provided input that’s been reflected in here. And of course, the Cullen commission’s recommendations are inherently part of this as well. We also worked closely with the BCFSA to create this legislation. And as I said earlier, we’re still working with them to work out the nitty-gritty of the rule-making ability.

Why do we have to do this? We are acting because the former government, the B.C. Liberal government, failed to stop money laundering in this province as it emerged as a threat to our province. The Cullen commission concluded about the previous government’s role in money laundering, and this is a quote: “What was lacking prior to 2018 was not the identification of an appropriate policy response, but rather the will” — I’ll repeat that, rather the will — “on the part of both government and industry” — of course, industry is not going to have will because there are nefarious people in there that are there profiting from it — “to take the kind of decisive action necessary to effectively respond to this problem.”

Well, this is decisive action. The former government’s direction to the BCLC failed to go far enough in that it did not require the BCLC immediately cease accepting highly suspicious cash. There’s a real nexus between money laundering, that cash that went into those casinos, the high price of real estate, mortgage brokers and non-traditional lenders and how money was lent to allow, again, nefarious actors to clean their money through real estate in British Columbia, directly causing the housing crisis that we’re in today.

Despite the former government having recognized by 2015 that there was a need to refuse at least some suspicious cash, they continued to accept it in substantial quantities over the next three years. This lack of will was exhibited throughout that time period. Again, nothing was done about this for many, many years, when the problem was first created, when it was obvious that there was a problem in the industry, when the former government was reminded about it, was told about it repeated times.

We’re dealing with that. We’ve dealt with not only this portion of the money-laundering part but other things as well, and we’ll continue to deal with that. We’ll continue to deal with the mess that was created before.

The Mortgage Services Act brings our mortgage lending regime into the modern era. It gives the regulating authority the power and flexibility to be able to make decisions and to be able to make rules that can be adaptive — that can change and that can be adaptive to the situations that exist at that time.

What could possibly change? Well, as we’ve seen in the last 40, 50 years, the type of mortgage instruments have changed over that time period. Technology has changed. The type of investment that there is in the real estate sector has significantly changed. It’s not just regular people buying houses for their family home anymore. You see a lot more REITs and other corporations investing in real estate in British Columbia.

[5:55 p.m.]

What this does is protect consumers. It protects the average person from nefarious actors that would otherwise bring in what really, frankly, is dirty money into that industry. And it aligns itself with the rest of the sector, with the rest of the administrative regime in the real estate sector. Those are all the reasons why I support this act.

K. Paddon: While I’m very glad to be rising to speak in support of the Mortgage Services Act, Bill 29, I’m not going to lie; it’s going to be hard to follow my colleagues who have already so passionately and extensively canvassed the need for this.

At its core, this bill is because British Columbians deserve better consumer protections and more transparency in the real estate sector. So for people, the dozens and dozens of people at home who have been watching because they’re interested in how bills are passed, which we know may not be the case…. The people who are interested in bills and why they’re so critical — this par­ticular act, on its surface, may not seem like the most intriguing — might be asking themselves: “Why are there so many government MLAs standing up to debate this bill? Why does this matter?”

I know my colleague from Langley started out…. He really went through the offences and the penalties, and he was really helpful in having us understand it.

[J. Tegart in the chair.]

For me — and with my background trying to make sure that people understand their rights, that they can access the information that they need — I’m going to take a little bit of a different focus and maybe circle back around.

Madam Speaker, it’s nice to see you in the chair.

I guess the thing that I’m going to start with is that I own a house. I’m very fortunate. When I had a young family, we were able to purchase a home in Chilliwack-Kent, where I get to serve. I’m going to be really transparent. When I went to get a mortgage, I understood the basics. I’m an intelligent person. But I didn’t understand everything about the person who was helping me with my mortgage. What did that look like? How were they qualified?

I think, like a lot of British Columbians, not all, we’re in certain relationships. Sometimes they’re called fiduciary relationships, and sometimes they’re not. But we’re in a lot of relationships where we’re assigning and ascribing a certain amount of trust. We’re handing over just a little bit of our power, and this is what I’m going to talk about around this bill.

We know that there are certain portions of our community, certain members of our population who routinely have their power kind of pulled away from them. So for young families, for people who are working hard, for people who may be marginalized….

Maybe they’re racialized. Maybe it’s women. Maybe it’s a single parent or a caregiver of someone who’s aging. It might be an immigrant. It might be a member of the LGBTQ2S+ community. Whatever the reason — whether maybe they have a visible disability, a cognitive disability, a mobility impairment — we know that there are systems already in place that routinely take their power or limit the power and choice they have access to.

Fun fact No. 1. The way this bill is written might be difficult for some people to understand if English is not their first language and they’re not used to reading this kind of document. But I’m really, really going to break it down, because it’s about consumer protection, and it’s about transparency for British Columbians.

So the first thing that I think needs to be understood is right in the definition section. For people who are reviewing bills, there are definition sections in the acts. So “mortgage services” — what we’re talking about here is anything dealing in mortgages: dealing mortgages, trading mortgages, mortgage lending or administering mortgages. And the people we’re talking about are brokers.

[6:00 p.m.]

What’s really fantastic is that I know, in my experience supporting people or doing my research or learning new things, there are some amazing people in the world of finance, in the world of mortgage lending and mortgage brokerage. So these rules, as has been explained by some of my colleagues before me, allow for us to make sure that the rules are being followed, but it’s important to know that there are already good people in this space doing really excellent work that allows people to purchase their homes.

By providing this stronger framework that’s found within the act for the regulation of mortgage brokers, the province is giving both borrowers and investors peace of mind. As has been mentioned many, many times, this is going to be the biggest purchase, likely — I can’t think of a bigger one — of someone’s life.

As I was mentioning before, when I first was looking at our first home — our family was going to buy our first home; it was the first time I had actually been involved in the world of purchasing — I actually heard from a mortgage broker.

At that time, I was still doing some research. I just assumed I would go through my bank and that that would be how I get my mortgage. But a mortgage broker contacted me, and I remember not being certain about what the difference was and about taking a look at borrowing and what framework existed around mortgage brokers. When I did look it up, it was a little bit difficult to understand.

One of the things that I’m really grateful for in this act, and one of the reasons I’m really grateful we’re talking about it right now, is just talking about the qualifications. Within the act, there are a bunch of sections for people — anyone who, maybe, isn’t familiar. If you’re explaining it to someone, it’s important to explain to them that there are different sections that deal with different things.

Section 15 deals with the qualifications for obtaining a licence. Now the Mortgage Services Act will require a licence. People will require a licence. An application for a new mortgage brokerage licence, principal broker licence or a mortgage broker licence — those are all defined in the act as well. The mortgage broker licence is going to be that individual, and the principal broker licence is going to be that individual, as well, or for the renewal, because that will be happening in the future.

Section 15 says they “must satisfy the superintendent that the applicant meets the following requirements.” This is what you know your mortgage broker will meet. The “applicant is of good reputation and suitable to hold the licence for which the applicant is applying.”

Good reputation — I mean, they’re probably not talking about your Facebook profile. They’re not talking about that kind of thing. They’re talking about trustworthiness. They’re talking about your reputation within the professional field. I don’t know. I’m not suggesting that I would substitute my understanding of what “good reputation” means for the superintendents in the future, but I think what’s intended here is as it relates to the function of a mortgage broker.

Section 15(1)(b): “in the case of an applicant for a new licence who is an individual” — because you can have a group of people, or a company, I guess; a brokerage is what they’re there called — “the applicant must be at least 19 years old” — I think that explains itself — “and meets the educational and experience requirements established by the rules.”

In here, this isn’t a list of which course to take. I know that we have a lot of youth coming up to graduation. They’re looking at post-secondary. Maybe this financial area is an area that’s interesting to them. It’s not laid out in the act, but you can absolutely talk to a career college or a university about what might help you get in there. And then remember to watch your Instagram because of that good reputation part, just in case. They must meet educational experience requirements.

[6:05 p.m.]

What this does tell us is that there’s a standard. That standard, I really like here. This is such a great modernization, generally, in the act. I like this piece, because what that means is that there’s a standard and the rules will set it. As standards change and evolve and develop, it allows room for the expectation to change and develop, without necessarily having to come back through a long process of looking at legislation. I think that kind of flexibility and real-world feedback is good, because we always know we’ll be up to date.

So “in the case of an applicant for a licence renewal who is an individual, the applicant meets the educational re­quirements specified by the superintendent.” Great. “(d) in the case of an applicant who is not an individual,” so a group, “the following individuals, as applicable, are of good reputation.” This is a little bit interesting, because now they’re going to talk about who specifically has to have a good reputation.

I guess that would be: “if the applicant is a partnership or a corporation, the applicant’s partners or directors and officers.” That’s good. They have to have a good reputation. And “if a partner of the applicant is a corporation, the corporation’s directors and officers” have to have a good reputation, and “if the applicant is not a partnership or corporation, the individuals who directly or indirectly control the applicant.” This is the kind of language I was talking about a few minutes ago. If you’re not used to reading this kind of stuff, if this is not what you do for fun, if you’re not actually watching right now because it’s just really interesting to you….

This kind of language and breaking down what a director is, what an officer is, these all have definitions, but you’re not going to find them in the front of the definition section of this act. What you will find are things like mortgage brokerage and mortgage broker, so that you’ll see the difference there, and persons and principal broker. Those are all going to be really important definitions.

Going back to the qualifications for obtaining a licence: “in all cases, the applicant has not, for a reason that reveals the applicant as unfit to be a licensee….” These are the reasons why they would be revealed to be unfit: “been refused a licence under mortgage services, real estate insurance or securities legislation in British Columbia or another jurisdiction.” This is really important as well, because we know that the Real Estate Services Act was kind of…. There was a modelling here, a bit, with some of the pieces.

If you have already been refused a licence, for whatever reason, under the Mortgage Services Act or in real estate or insurance or securities — that’s a big umbrella — based on legislation in B.C. or another jurisdiction…. Here’s where I think that’s really important. It’s because it means that people who are seeking a mortgage with a licensed mortgage broker or brokerage know that, whether in B.C. or in another jurisdiction, a licence has not been refused.

When we were buying our home the first time, we were trusting the people we were talking to. You know what? We’ve been really lucky. We’ve had great realtors, and we know what that means. This will help a lot of people really, really understand who they’re talking to when they’re talking about the borrowing for buying their home.

The applicant also “has not, for a reason that reveals the applicant as unfit to be a licensee, (ii) held a licence that was suspended or cancelled under mortgage services, real estate, insurance or securities legislation….” So not only were they not refused, but it hasn’t been cancelled or suspended. That’s important because if it was only refused…. If that was the rule, that it had to be refused, and the person’s licence was suspended, and they just simply didn’t reapply, then technically it wouldn’t have been refused. So it’s good that the “cancelled or suspended” is there.

[6:10 p.m.]

The third reason it would reveal the applicant is unfit would be if they have “been disciplined by a professional body or (iv) been convicted of an offence.” Again, it really allows you to know that the qualifications for working with a licensed mortgage professional will include certainty that these things have not occurred.

An applicant for a new mortgage lender licence or for the renewal of such a licence must satisfy the superintendent that the applicant meets the qualification requirements established by the rules. We need to provide the B.C. Financial Services Authority with the tools to regulate the financial service industry that we find ourselves in today.

We need this modern act while guiding the industry to adopt responsible business practices in the future. The act and the definitions set out what that framework is going to look like. We want to make sure that B.C. has effective consumer protection legislation and world-leading protections against money laundering. So creating the Mortgage Services Act is an essential part of that.

Now, when we bought our first house — and I know I kind of started there — we did end up going with our bank, and we were really fortunate because we had someone who would walk us through. I remember asking about the mortgage broker because I wasn’t familiar, and it’s important that I learned more so that I understand what my options are.

One of the things that was a little bit surprising to me was that the relationship with the bank and the professional helping me at the bank and the relationship with the mortgage broker were completely different. I didn’t realize. But now we’ll know that the qualifications for being licensed for that mortgage broker are being held to that standard.

There are exceptions to who has to be licensed. I know some of my colleagues have already canvassed that. What happens if you break the rules? My colleague from Langley discussed the offences and the penalties, and they’re really steep. And quite frankly, given the trust that is part of that relationship and given the risk that both the individual and the lending institution, I guess, are taking, the penalties should be stiff.

We know how much damage can be done if the system itself is used in nefarious or negatively intended ways. We see the damage. We see what happens when people exploit loopholes. We see what happens when money floods in that can’t be explained. We see what happens when people borrow $1 million for a new home and they don’t actually have an income that can support that whatsoever. How does that work? We see very clearly the impact and fallout of when those loopholes exist, so to my mind, the penalties need to be set where they are.

There was consultation, as was mentioned before. I be­lieve it was 43 stakeholders who were consulted. I read that there were stakeholders who thought the penalty might be too high. And you know what? If you are somebody who follows the rules, who does their best and earnestly endeavours to really do right by people and do a fulsome and knowledgeable and responsible job, then seeing that there could be a penalty anywhere from $100,000 to $2.5 million would be very intimidating. So I can understand why that feedback would exist.

If I knew I was engaging in work where I would potentially be responsible for a $2.5 million penalty, I would definitely be anxious. I would definitely pay attention to that. That being said, the people who are paying attention to it, the people who that would make nervous because they wouldn’t want to make a mistake and end up there…. Those are not the situations that are being described here.

[6:15 p.m.]

There are significant parts of this act that deal with things like complaints and offences and appeals, so a simple error is not what we’re talking about here. But British Columbians, regardless of how much they know about the current state of education for mortgage brokers, regardless of how much they know about money laundering or the Cullen report or any of the impacts of loopholes — regardless of any of that — do know that there’s an act that has mechanisms, with fines that are very substantial.

The fact is that they have a government that’s committed to taking really strong actions to protect people in British Columbia and eliminate dirty money from the communities and our economy. At the end of the day, they will have licensed mortgage professionals who have their back. They have a government that has their back, and a fulsome understanding, I hope. Maybe this helped; maybe it didn’t. Maybe it helped one person, who will explain it to their 13-year-old, and at some point, when they’re looking at buying a home, they’ll understand the things that are required to be qualified to be licensed.

I do appreciate the time to discuss this, to break down the qualifications that are laid out in the act, and I appreciate the modernization of this. The act was originally written in the ’70s. That feels like a long time ago — for a lot of reasons, technology-wise — a long time ago, lifespan-wise, for many people.

Interjection.

K. Paddon: Yeah, I hear good things; I hear good things. There’s a range of ages within the chamber, and I’m very grateful for that.

The original work, in the ’70s, is being modernized now, but we know that other jurisdictions have already conducted modernizations. I’m very happy to support this act. I’m so grateful to be able to stand up and speak about it, especially as it relates to people who may or may not have a fulsome understanding.

You know what? I have the benefit of staff. I can ask questions. I can read the bill. I can take a look at statements by others. I have a lot of information that helps me to fully understand the impacts of bills whenever they come up. I’m grateful for the opportunity to explain just a little piece of it — more of the benefit than the stick, as some of my colleagues have — but I’m also grateful that there are some loopholes being closed and that British Columbians ultimately will be better protected.

G. Lore: I, too, am grateful for the opportunity to speak to this legislation. According to the Cullen report, it’s estimated that $1 billion per year is laundered in B.C. This, without a doubt, requires strong and decisive action on our part.

A billion dollars. I think about the impact of that on our community and, correspondingly, what the impact could be if that were not illegal money, if that were in our economy in different ways. The possible impact on housing affordability — that is, the impact of illegal money on a human right, of safe and affordable housing — was one of the main issues that the Cullen commission heard when they were here in my community of Victoria.

The Expert Panel on Money Laundering in B.C. Real Estate found that money laundering investment in B.C. real estate is sufficient to have raised housing prices and contributed to B.C.’s housing affordability issue. They of course recognized that by its very nature, it’s not easily countable, that it’s not out in the open and that the data limitations themselves make it difficult to estimate the level of money laundering.

[6:20 p.m.]

However, the panel cautiously estimates that almost 5 percent of the value of real estate transactions in the prov­ince is the result of money laundering, leading to an estimation of an increase in housing prices by 5 percent. Given the housing crisis, given the cost of housing, this is significant.

British Columbians need and deserve better consumer protection and more transparency in the real estate sector. They deserve this as consumers. They deserve this as investors or lenders, as first-time homebuyers. They especially deserve this transparency and this consumer protection in the context of money laundering and its impact on our communities.

This is work that we are undertaking with this bill. Not this bill alone, as my colleagues have mentioned, but it is a really important piece. I do think that this is in contrast to what the Cullen commission described as a failure of will to stand up for British Columbians and to protect from money laundering. As my colleague from Maple Ridge–Mission said, it is certainly not a victimless crime.

The Cullen report also said: “Regulation of the B.C. mortgage lending industry is deficient in many ways.” So that is what we are looking to address here.

Recommendations also came from the Expert Panel on Money Laundering in B.C. Real Estate, including the recommendation to replace the Mortgage Brokers Act with a modern regulatory statute that is effective in regulating all those in the business of mortgage lending.

Again, this is action we’re taking, steps we’re taking here. I am a little surprised at the lack of participation on the other side. I think it is really essential for us to be paying attention, to be listening to expert reports on this and to be taking action.

I think it’s also worth noting another risk, another possible impact of money laundering, as identified by the expert panel, which is “corroding the rule of law”: in other words, the serious political and civil society impacts of this crime.

I’ll quote here again. “When money launderers gain a stronghold in a country, province or city, significant adverse consequences for democracy and the rule of law will result. Wealthy criminals do not only import crime and the proceeds of crime into a society. Large criminal organizations engage in the widespread use of corruption and bribery…to ensure that their activities continue unimpeded.”

The report indicates that we as a province are a ways from that but not enough to not take very seriously the possible consequences of money laundering for these critical political and civil society institutions. It said: “Accordingly, taking action to stem the flow of money laundering in B.C. and Canada is a matter of utmost importance.”

I’ve spoken about the importance as it relates to housing affordability and the impact on the housing market — again, one of the key components raised when the Cullen commission was here in Victoria. I also am now speaking to the impact on social society.

This expert panel then goes on to say: “Money laundering also requires enablers, often professionals who are trusted by society to provide needed business and personal services, including lawyers, accountants, real estate professionals, securities dealers and mortgage brokers. While some are unwitting participants, others are corrupted by the temptation associated with the rewards for helping to conceal dirty money. This has significant consequences for the faith and trust placed in these professions.”

We’ve got the impact on the housing market. We’ve got the impact on political and civil society. In short, then, updating the legislation on mortgage services has to be a priority, with serious implications. It was a priority for the Cullen commission, and that’s what this legislation is doing.

This act will provide us with a framework to do better. We need to do better — to regulate mortgage brokers and to give borrowers and investors protections and peace of mind. In fact, given the history and the extent of money laundering and the impact on our communities, some of which I’ve outlined, we want to make sure that we have world-leading protections against money laundering, and to do that, we need this Mortgage Services Act.

[6:25 p.m.]

The legislation replaces the Mortgage Brokers Act with something that is more effective, more efficient and modern. There have been updates along the way, but as my colleague from Chilliwack-Kent noted, this bill was introduced in the ’70s.

I’m not meaning to rub anything in here, but this was more than a decade before, maybe up to 15 years before, either myself or the MLA for Nelson-Creston, as the youngest MLAs in the House, were born. That’s a long time. Long enough for several of us to have eventually been born, grown up and been elected to this place.

Other provinces have done a full update, but we have not.

Interjection.

G. Lore: I can hear some comments from my colleague the Minister of Municipal Affairs. My comments were actually quietly directed at the Minister for Parksville-Qualicum, but he’s no longer here.

The consequences of not updating this, of not doing a full overhaul, have been made clear over time here in B.C. They were made clear under the previous government when they were not addressed and money laundering was massive. This act is strong. It provides us with the framework we need to protect consumers, to protect British Columbians.

As has been outlined by my colleagues, the penalties are severe. The maximum administrative penalty is $100,000, and individuals or corporations with more than one offence conviction could face up to $2.5 million. These penalties have to be severe. This is not a victimless crime, and the penalties should be proportionate to the impact, as I outlined, on something as significant as the housing market and civil society.

They also have to be significant, severe and large because of the possible upsides of engaging in money laundering. We have to make the risks and costs associated with behaving badly in these industries proportionately large. This act covers all private lenders. Any private lender will need to be licensed under this mortgage act, even if they were not required to be licensed under the previous act. And why do they need to be licensed? Because the Cullen commission found that anyone who lends money on the security of a mortgage presents a money-laundering risk, and we have to choose to take action. We have to not look away.

The impact of this bill is huge. There are over 5,000 registered mortgage brokers and sub-mortgage brokers in B.C. — 5,000. We need good, efficient, modern, effective regulation. The mortgage brokers here in B.C. account for 30 percent of all Canadian residential mortgages. Again, that’s a huge impact of this bill. It’s an important change. It matters that we have a robust, modern, efficient system, and that is why I am glad to stand up and speak in favour of this bill today.

Hon. N. Cullen: It’s a pleasure to join the conversation. A real pleasure to listen to colleagues help, I think, do the job that legislators are required to do from time to time, which is to try to interpret, translate, what might seem like very specific and sometimes arcane legislation — what its motivation is and how it’s going to affect the lives of British Columbians, the people that we serve.

I’m very proud to stand today in support of Bill 29, the Mortgage Services Act, and I do this with two hats on. One is as a representative of Stikine — a very large, beautiful riding to the northwest of our province that looks like it’s not going to change in shape or size according to the commission, which we are grateful for, because it already is the largest riding.

I’m going to go visit a corner of it, hopefully, next week in Atlin, B.C., which is a very quick 15-hour drive from my home in Smithers at the southern end of the riding I represent. The reason I talk about Stikine to talk specifically to this bill is to understand how this will affect the people that I represent — and I think in a very, very positive way.

[6:30 p.m.]

Colleagues earlier, my friend from Victoria and others, talked about the exercise of going through a mortgage, of what it is to attain one and the trust required — particularly for first-time buyers, but anyone, especially if they seek the services of a mortgage broker. We have some benefit, in a small town, of knowing everybody, and reputation is everything. Usually, folks don’t survive as brokers or in small business if they have terrible business practices, although it’s not always the case.

We had a situation in a neighbouring community — I won’t name which one, because it might still be in the courts — where a mortgage broker acted in incredibly unethical ways and ended up depriving people of, essentially, their life savings. I’m very excited about the update to this piece of legislation in how it’ll ensure that the trust between someone seeking a mortgage and those providing those services will be held to a very high and consistent standard, with consequences if that doesn’t happen.

Now, there has been some discussion about the need to update this legislation, because it was first cast way back in the ’70s. Now, I was first cast way back in the ’70s, and I’m sensing that I, too, might need some kind of an update. Apparently, that’s about how long it is — and maybe even overdue, according to colleagues. With respect to legislation and the rules that guide mortgage brokers, I take that with absolute benefit and guidance from my younger colleagues around the House — that updates are always valuable.

This one required 105 different sections to modernize it. I hope I don’t require that same level of modernization — but possibly because, honestly, TikTok still confounds me. I lean in when my kids are on it to try to understand exactly what’s going on but mostly know that I should probably just go take them hiking whenever they jump on their phones.

I’ve noticed, as well, in watching the debate, not a great deal of comment coming from the opposition — which, I think, is maybe a little disappointing, if not surprising. What we’re doing with respect to mortgage brokers is very, very specific on two initiatives, one with respect to consumer protection, which we deeply care about on this side and, I hope, had similar concerns on the other.

Having watched the housing market spin almost vio­lently out of control over many years while they were in government and not doing anything about it, maybe even making it worse…. It would have been nice if they had sworn the Hippocratic oath at least not to make it worse while they were in government. They chose not to, and just seemed to think that this circular, escalating “constantly out of reach of ordinary working people” housing market was a fine thing for the B.C. economy over the long term. We’ve seen the impacts of that, and we’re dealing with the impacts of that still to this day.

The second piece, beyond consumer protection, is this very, very serious issue of money laundering, as we saw through the Cullen commission. I checked with the Table; I’m allowed to name by name. There’s no relation that I’m aware of.

It was an incredibly important commission, which we struck, under the auspices of the former Attorney General, to take a very serious look at what’s going on in B.C. It had been described as the Wild West by the New York Times, the Globe and Mail and people who study the very serious issue of money laundering and what those impacts are on the streets of our communities, on the prevalence of organized and violent crime in our communities.

One of the set of recommendations out of that commission, out of the Cullen inquiry, was specifically around the money laundering that was happening through our real estate market. This is organized crime that takes place all over the world. These are the most, as we found through that commission, violent, heinous types of gangs one could imagine, involved in the illicit and deadly toxic drug trade, involved in human trafficking, prostitution on a global scale, and involved — in some cases, we believe — in terrorist activities and on and on.

One of the key factors in any crime syndicate, whether it be local or global, is the ability to launder the proceeds of crime — the ability to acquire the money, then not go through formal channels to clean that money and then be able to use it for other purposes. There were two explicit places where that happened here in British Columbia, in an inordinate amount, to a level that is completely disproportionate to our population and to the crime actually taking place in B.C. That was in casinos, and that was in the real estate market.

[6:35 p.m.]

What confounds me and angers me, frankly — I don’t necessarily hold current members that I look across at, the opposition ranks, personally accountable; although some of them had some affiliation to the government at the time — is that they knew about it. It’s that the government of British Columbia, under a previous regime, knew this was happening, knew that our casinos were targeted by organized crime, both from here in B.C. and from international crime syndicates. They knew that our housing market was targeted as a place where you could launder and stash the gains from illegal activities on a global scale and a local scale.

Why that matters is we hear much, and it’s important — we’re hearing this from communities, from mayors, police advocates and from the opposition earlier today — about the concerns about public safety. Whenever dealing with those concerns, one must always seek out the source, always try to understand where this is coming from. We’ve talked, we’ve ascribed much of it and the understanding is there.

Mental health and addictions; toxic drug supply; the cost of living and insecurity that exists within our communities; the need to bring new and innovative ways to dealing with policing and all the rest; organized crime and its ability and the propensity for it to have flourished in British Columbia for so many years, mostly unchecked; and the ability for organized crime to launder their money through the real estate market and casinos, which the government of the day, the ministers responsible, were made aware of directly — we have this in testimony and on the record — and chose, as the Cullen commission found, not to adequately deal with it.

That’s why something that looks relatively obscure and incredibly detailed and maybe somewhat boring to the average person, the Mortgage Services Act, Bill 29, speaks to a very serious issue that affects all of us: our sense of peace and security in our communities and our ability to be “tough on crime.” To tackle crime, you’ve got to go after the money.

With the current Leader of the Opposition, who was around the cabinet table for much of that time under a previous regime, I take it with a bit of concern that there’s so little responsibility — that’s part of their rightful questioning of us as a government — in saying the lack of action, the lack of seriousness and the responsibility taken that happened over many, many years contributed to having a very fertile ground here in British Columbia for organized crime to launder their money through reprehensible actors within the mortgage brokerage community and launder their money successfully over many, many years, never mind the activities within the casinos, which were also taken care of.

What have we done? We have taken the recommendations and taken the very good counsel and advice from the Cullen commission and other experts in the field of money laundering and brought up the requirements of those who deal with mortgages and brokerages to say that we’re going to have new standards and new levels of training. We’re also going to have implications of those standards. If someone falls behind….

The previous penalties were a bit of…. I don’t want to say a joke, because $5,000 is a lot of money to most people. But when you’re dealing with transactions in the millions, the threat of a $5,000 fine cannot be taken seriously. It’s a rounding error for those folks that were willing to participate in near-illegal activities, certainly unethical ones.

That was not a deterrent to anybody. We’ve upped those fines significantly, starting at $50,000 and moving all the way to a $2½ million penalty for companies that engage in breaking the codes and the standards that will be set through the B.C. Financial Services Authority.

I hope there’s broad agreement — I haven’t heard it from the opposition yet, but I suspect there is — that that is the right regulator. It is at arm’s length from government. It is going to work with the brokerage community. It’s why they’re supportive of what we’re doing today to set those standards, renew those standards and bring mortgage brokers along with the training and the standard so that everybody understands what the rules of the game are — the overwhelming majority of the 5,000 people or so that are currently licensed in B.C. and that handle, and help people through, the mortgage process, which was very helpful.

I don’t know, Madam Speaker, if that was your experience if you’ve ever purchased a home. It’s incredibly helpful for those of us that that aren’t in the home-flipping business. We get a mortgage once every 20 years or so. Having somebody help guide us through that process is very important and, like I said at the beginning of my comments, a bit of an exercise in trust, wanting to make sure that the person that we’re relying on in their guidance is good and that we have fair warning.

[6:40 p.m.]

Now, there’s a couple of rules or guidelines for why the situation got so bad here in B.C. I think Hanlon’s razor is a good rule, perhaps. Try not to ascribe to malice what one can chalk up to incompetence.

[Mr. Speaker in the chair.]

I’m testing this one pretty hard. If I look at the past government, I have to say: “Oh, they never cracked down on this money laundering in the real estate market.” For what reason? Why not? When given warnings, when seeing the housing market get out of control, when being given warnings by police saying, “There’s money laundering activity going on in our housing market, particularly in the greater Vancouver area,” the government chose not to act.

Was it malice, or was it incompetence? Neither option is particularly outstanding. For a government of that day to have to admit to the raging incompetence, year after year, of seeing the housing market rise almost illogically out of control, with having warnings from police and international agencies, FINTRAC and others, saying there’s something happening — particularly in the Vancouver market but maybe in Victoria and Kelowna and other markets — where illegal money was being laundered through the real estate sector…. And the government choose to say: “We just simply don’t see it.” Was it malice? Was it incompetence?

I think we then take another razor, which is Occam’s razor. When looking for an explanation of something…. If you have two choices, between complexity and simplicity, it’s often best just to use the most direct line, a simple answer.

We’ve seen, perhaps, somewhat of a conflict of interest. There are many in the government that prior, during and then after their time serving the people of British Columbia were very much involved in the very lucrative market of housing, real estate, speculation, house flipping, all of the rest. It was the best place to make money in B.C. over many years.

There were many staff and elected peoples of that particular government who indulged and made quite a bit of profit — and then claim a great concern about housing affordability now, worry about housing affordability. How are people going to afford housing? It’s like…. Yes, that’s an incredibly important challenge that we face as a government. But a little bit of accountability.

This is what I think drives people crazy about politics sometimes. You watch people, clearly implicated in creating the problems, suddenly waking up one day and saying, “Oh my gosh, there’s a problem. We’ve got to do something about it” and then seeking somebody else to take the responsibility. We, as a government, are taking responsibility for this. That’s what bills like this are for — to help out consumers and to deal with the issue of money laundering in our real estate market, which we, I hope, all agree is an incredibly important thing to take on.

I want to speak for a moment to the B.C. Financial Services Authority. You can tell, through this legislation, if you get through all 105 sections, that we rely pretty heavily on their ability to help marshal the mortgage brokerage community and businesses through this new standard and through these new objectives.

As I said earlier, the penalties for failing on these standards are pretty significant. Not only the potential of somebody losing their ability to continue to be a mortgage broker, but there are financial considerations, from $50,000 to $2.5 million in penalties.

We’re relying on the B.C. Financial Services Authority quite a bit. We have great faith in their ability to administer the handling of the conversation between themselves, as a pseudo representative of government, and the industry itself.

I think part of the reason the industry — and money-laundering experts and policing experts and others — is so supportive of what we’re doing here today is because of that relationship between the B.C. Financial Services Authority and the brokers in B.C., knowing that the guidelines that are going to be put down are going to be found with great thoughtfulness and intelligence and understanding of the industry. We don’t want to make things unduly cumbersome. We just want to make them much better.

I think there’s oftentimes, for those of us in elected office, when taking on these wicked problems…. I would suggest the issue of money laundering, organized crime, international organized crime is a wicked problem. They say that the water from organized crime is like water on a sidewalk. It finds its way through all the cracks and anything that is exposed at all. The crack in the B.C. housing market was massive.

[6:45 p.m.]

The ability to launder money through British Columbia was incredibly large, and organized crime knew that, on a global scale. I can only think of all of the effects that’s had on average, ordinary British Columbians who were trying to buy a house through that time.

How much more did they have to pay because the government of the day was so permissive and so wilfully blind to the problem that existed within our province? How many young families couldn’t ever afford a house in those many, many years in which this was happening?

The housing rates were exploding, not just in Vancouver but in many of our communities, in some percentage part due to organized crime laundering their money through and inflating the prices artificially. How many people have paid so much more in mortgages than they would have otherwise? That bill would be in the hundreds of millions of dollars for British Columbians over time.

Now, we know that the process that we’re using here is giving fair warning to the brokers, in terms of co-developing the new standards and, once developed, making sure that their implementation is respectful, in a timely way, and that they understand the consequences clearly and explicitly with regards to having failed to meet the new standards.

This is something I think will, happily, impact that industry and the 5,000 people directly implicated by it but also, happily, ensure that trust, which I talked about at the very beginning of my comments, that must exist between those seeking the services of a mortgage broker and the mortgage broker themselves.

There should be no fear within the industry of the standards we’re looking to put together, to co-design and co-implement, and the use of the B.C. Financial Services Authority to enforce those standards and to ascribe penalties to bad actors. I don’t care what particular industry it is. If you get 5,000 whatevers together, there’s going to be a few people in there, at least, who are not guided by the general basic ethics that most of us follow. It’s those folks that maybe and hopefully are a bit worried about what’s to come.

I think it’s good that we based many of the recommendations that are drawn into this legislation directly from the Cullen commission, which was exhaustive in its search. I don’t think the federal participation, as witnesses in that particular commission, were as forthcoming as I think they ought to have been.

It was a great deal of reluctance, it seemed to be, from some of our federal counterparts in owning up to the responsibilities that Ottawa had for what has happened in British Columbia and the effect that it’s had on all British Columbians, I would argue — the lack of public safety, the artificially inflated housing prices. If nothing else, the Cullen commission was exhaustive in seeking to fully understand.

You can see throughout the many, many sections of this bill…. Again, it was not updated substantially since the ’70s, which, by the way, put us behind virtually every other jurisdiction. So this was overdue. This was clear. When you start to look at other jurisdictions, this was something that was much needed and much needed now.

I’m proud of our government for doing it. This is not simple work. This is not quick work. Yet it’s incredibly important work for helping out so many of the issues that we’ve canvassed here today.

I would encourage opposition members to engage in this. It’s okay to take a little bit of a look back at the history and take a little responsibility and ownership for actions not taken when they were in power, just to understand that this is finally happening, and it’s a good thing. It’s a good thing for B.C. consumers, it’s a good thing for public safety, and I think it’s a good thing for our province.

Mr. Speaker: Seeing no further speakers, the minister would like to close the debate.

Hon. M. Farnworth: I want to thank members for participating in the debate. I want to thank my colleague for the thoughtful speech. I want to also let members know that there will be, no doubt, exhaustive and further detailed discussion during the committee stage of this debate.

With that, I move second reading.

Motion approved.

Hon. M. Farnworth: I move the bill be committed to a Committee of the Whole at the next sitting of the House after today.

Bill 29, Mortgage Services Act, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

Hon. M. Farnworth moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 10 a.m. tomorrow.

The House adjourned at 6:49 p.m.