British Columbia’s Mortgage Services Act (MSA) expressly includes mortgage lending within its regulatory framework. To understand when a lender needs a licence, however, it is necessary to distinguish between two separate licensing triggers: carrying on a business and, for individuals, providing mortgage services for remuneration.
A third trigger, directed specifically at mortgage lending, has been enacted but its implementation has been deferred.
This distinction explains why the exemption for certain individual non-business lenders matters today. Being outside the business trigger does not necessarily put an individual outside the licensing framework altogether.
Mortgage Lending Is a Mortgage Service
Section 1 of the MSA defines “mortgage services” as:
(a) dealing in mortgages,(b) trading in mortgages,(c) mortgage lending, or(d) administering mortgages.
Because mortgage lending is a mortgage service, the general licensing requirements for mortgage services must be considered when assessing whether a lender requires licensing.
The Licensing Framework at a Glance
The following chart distinguishes the two operative licensing triggers, the deferred lending-specific trigger and the exemption for qualifying individual lenders.
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Provision
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Who it addresses
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What triggers the requirement or exemption
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Significance for mortgage lending
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MSA section 3(1): business trigger
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A person, including an individual or corporation
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Carrying on the business of providing mortgage services
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A person carrying on a mortgage-lending business must be licensed as a mortgage brokerage for that service, unless exempt.
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MSA section 3(2): individual remuneration trigger
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An individual
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Providing mortgage services for direct or indirect remuneration, as an employee or otherwise
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The individual must be licensed as a principal broker or mortgage broker and act on behalf of a mortgage brokerage, unless exempt. This provision does not contain a business test.
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MSA section 3(3): lending-specific trigger, deferred
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A person providing mortgage lending
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Providing the mortgage service of mortgage lending, without an express business trigger
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Once brought into force, this provision would require an authorized licence or exemption for the lending activity itself. It is not currently an operative licensing requirement.
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Mortgage Services Regulation section 39: individual exemption
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An individual meeting all the exemption conditions
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Lending their own or their spouse’s money, acting only for themselves or their spouse, and not carrying on a mortgage-lending business
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Provides an express exemption from Part 2 licensing for the qualifying mortgage-lending activity. It is not available to a corporation or an individual operating a lending business.
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The practical point is that section 3(1) and section 3(2) ask different questions. An individual may be outside the first provision but still need to consider the second.
The Business Trigger Applies to Individuals and Corporations
Under section 3(1), a person must not carry on the business of providing mortgage services unless licensed as a mortgage brokerage to provide those services or exempt under section 4 or the regulations.
For mortgage lending, the question is whether the person is carrying on the business of providing that service. This can apply to an individual lending personally or to a corporation conducting a lending operation.
What counts as carrying on a mortgage-lending business?
BCFSA has not provided guidance on this question. The organization, continuity and commercial purpose of the lending activities are likely to be relevant to that assessment, but these are not a BCFSA-prescribed test. Lending through a corporation may be an indicator of a business operation.
Similarly, an individual does not fall outside the business trigger simply because the loans are described as personal investments or are funded with personal money. The activity itself must be assessed.
Where a lender operates an organized mortgage-lending business, the business-licensing requirement must be addressed unless a specific exemption is available.
Individuals Must Also Consider the Remuneration Trigger
Section 3(2) separately prohibits an individual from providing mortgage services for direct or indirect remuneration, as an employee or otherwise, unless the individual:
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is licensed as a principal broker or mortgage broker to provide those services and acts on behalf of a mortgage brokerage; or
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is exempt under section 4 or the regulations.
Unlike section 3(1), this provision does not require the individual to be carrying on a business.
It is therefore not enough for an individual to conclude, “I am not in the business of mortgage lending.” That conclusion addresses section 3(1), but does not by itself resolve section 3(2).
Whether interest or another financial return constitutes remuneration for the particular mortgage service is an interpretive question. BCFSA has not provided guidance on this question.
This is where the express exemption for qualifying individual lenders becomes important.
Why Section 39 Is Needed
Section 39 of the Mortgage Services Regulation exempts an individual from the requirement to be licensed under Part 2 of the MSA when providing mortgage lending if all three conditions are met:
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Own or spousal funds: The individual lends money belonging to the individual or their spouse.
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Limited capacity: The individual does not act on behalf of anyone other than the individual or their spouse.
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No lending business: The individual is not carrying on the business of providing mortgage lending.
The exemption covers Part 2 licensing for the qualifying activity, including the separate remuneration-based requirement for individuals.
An individual who satisfies section 39 therefore does not have to rely solely on the argument that they are outside section 3(1), or resolve the remuneration question under section 3(2), to establish their exemption for that lending activity.
What the exemption does not cover
Section 39 is not a general private-lender exemption. It does not cover an individual who operates a mortgage-lending business, lends funds belonging to unrelated investors or acts on their behalf. It also does not apply to a corporation, including a corporation wholly owned by the individual. Money belonging to that corporation is not the shareholder’s personal money for purposes of the exemption.
How the Analysis Differs for a Corporation
A corporation cannot rely on section 39 because that exemption applies only to individuals. But section 3(2) also applies only to individuals.
For the corporation’s own lending activity, the central operative question is therefore whether it is carrying on the business of providing mortgage services under section 3(1), and, if so, whether an exemption applies. Individuals providing mortgage services on the corporation’s behalf must separately consider section 3(2).
The Deferred Lending-Specific Trigger
When brought into force, section 3(3) will establish a further requirement directed specifically at providing mortgage lending. It contemplates licensing as a mortgage lender, mortgage brokerage, principal broker or mortgage broker, or an exemption.
Unlike section 3(1), it does not contain the words “carry on the business.” Its significance is that it would introduce a licensing requirement directed at the lending activity without first requiring a finding that the lender is carrying on a business.
A Practical Licensing Review
Before advancing funds, a lender should identify:
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The legal lender: Is the money being lent by an individual, a corporation or another structure?
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The activities performed: Is the person only lending, or also dealing, trading or administering mortgages?
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The business position: Do the activities constitute carrying on the business of providing mortgage services?
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The individual’s role: Is an individual providing mortgage services for direct or indirect remuneration?
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The exemption relied on: If section 39 is relied on, can each of its three conditions be demonstrated?
This article provides general information, not legal advice. A lender’s licensing position depends on its legal structure, activities, ownership of funds and the capacity in which individuals act. The commencement status of deferred provisions and the availability of exemptions should be checked when a transaction is assessed.
