Ontario tribunal found “intentional and reckless” conduct in alleged high‑cost lending scheme
The Financial Services Tribunal of Ontario has ordered Toronto businessman Harold “The Jewellery Buyer” Gerstel and his wife, Esther, to pay a total of $210,000 in administrative penalties.
Adjudicators found they ran an unlicensed private‑lending scheme that left borrowers facing what the panel described as “serious economic and psychological harm.”
Tribunal rejects ‘no harm’ defence
In reasons released April 21, the three‑member panel concluded that Gerstel “contravened subsection 2(3) of the Act by dealing in mortgages in Ontario for remuneration while not acting on behalf of a mortgage brokerage or exempt from the requirement to be licensed.”
It found that he used the prominence of Harold the Mortgage Closer Inc. (HTMC) and his TV and radio ads to attract six high‑risk borrowers, then “did not take the Borrowers on as clients of HTMC,” depriving them of suitability reviews and conflict‑of‑interest disclosure.
Instead, the panel said, those clients were steered into 24 short‑term mortgages funded by Esther Gerstel Inc. (EGI), a corporation the tribunal described as “for all practical purposes” Gerstel’s alter ego.
The loans typically carried interest of 22% plus sizable lender and renewal fees, often deducted in advance. In one deceased borrower’s case, effective annual rates ran “between 51% and 56%,” according to the decision.
“Each of the Borrowers who testified suffered serious economic and psychological harm from their ever‑increasing debt with little or no prospect of preserving the remaining equity in their homes,” the panel wrote.
“The Applicants’ submission that the Borrowers did not suffer any harm is appalling and reflects a total disregard for their professional obligations and the implications of their behaviour for their clients.”
The tribunal found Gerstel’s evidence “argumentative, evasive and manipulative” and said his testimony “on a number of key points and, generally, [was] not… truthful, credible or reliable.”
Gerstel, who previously told CTV News Toronto “we did not cause them harm” and that borrowers “had very bad credit” and could not obtain funds elsewhere, has indicated he intends to appeal.
Pattern of FSRA enforcement on unlicensed and off‑book dealing
The ruling followed an earlier tribunal decision that revoked HTMC’s brokerage licence and refused to renew Gerstel’s personal broker licence, with a separate $70,000 in penalties now under appeal.
The latest order also imposed six $10,000 penalties on Gerstel and six $25,000 penalties on EGI, and directed the Financial Services Regulatory Authority of Ontario (FSRA) to issue a permanent cease‑and‑desist order against EGI’s mortgage‑lending activities.
The tribunal said Gerstel’s conduct was “intentional and reckless and was designed to achieve the maximum economic benefit from the interest rates and lender’s fees charged to the Borrowers, none of whom were in a financial position to refuse.”
FSRA’s focus on high‑cost and unlicensed mortgage activity has intensified in recent months.
In March, it issued a notice of proposal targeting an Ontario agent and former agent over alleged direct‑to‑lawyer fees and unlicensed brokering.
In January, a tribunal ruling upheld $75,000 in penalties against former broker Yashna Singh. That case also confirmed a compliance order for post‑termination dealing and unlicensed brokerage activity.
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