ASIC has today published regulatory guidance to assist in the application of the new best interests duty for mortgage brokers, which comes into effect in 2021.
The new obligations were legislated by the Parliament in response to Recommendation 1.2 of the Financial Services Royal Commission. From 1 January 2021, mortgage brokers will be required to act in the best interests of consumers and to prioritise consumers’ interests when providing credit assistance.
Consistent with this legislation, the guidance is high level and principles-based, but also incorporates practical worked examples. The purpose of the guidance is to explain the obligations introduced by the Government – it does not prescribe minimum standards of conduct, nor does it impose new or additional obligations.
Regulatory Guide 273 Mortgage brokers: Best interests duty (RG 273) contains ASIC’s views on how mortgage brokers may comply with their best interests obligations at key stages of the credit assistance process. It provides guidance on:
- the effect of the range of credit providers and products brokers can access
- recommending packages of credit products
- the types of records that may be kept to demonstrate compliance.
Announcing the new guidance, ASIC Commissioner Sean Hughes said, ‘These are important and timely reforms for the mortgage broking industry and for customers shopping for a loan. This reform was legislated by the Parliament to improve the quality of credit assistance provided to consumers. ASIC supports that objective.
‘Consumers rightly expect mortgage brokers to act in their best interests and ASIC’s guidance describes how we expect them to do so. Under these new obligations, let there be no doubt – the consumer must always come first.
‘We released this regulatory guide as early as effectively possible, to help industry prepare on a timely basis for the best interests duty and related obligations before January 2021.’
From 1 January 2021, ASIC will closely monitor conduct and outcomes to ensure mortgage brokers are complying effectively with the best interests duty.
Alongside the new guidance, ASIC has also published a report responding to feedback received during the consultation process (REP 662).