Why does ASIC highlight the importance of BID(Best Interests Duty) currently?
BID, also known as the Best Interests Duty, is a legal requirement that mortgage brokers must follow when recommending a home loan. It says that the mortgage brokers need to act in the best interest of their clients.
When was BID introduced and why?
BID was introduced after the Royal Commissions into Misconduct in the Banking, Superannuation and Financial Services Industry, which found unethical practices across the financial services industry.
It is also worth noting that after the commission recognised misconduct across the banking, insurance, and superannuation sectors, ASIC (Australian Securities and Investments Commission) and APRA (Australian Prudential Regulation Authority) adapted to several regulatory changes and enforced them.
After the Australian government accepted the recommendation, BID took effect from January 2021.
The important reasons why BID was introduced for mortgage brokers are,
Lender recommendation and commission payouts
We know that a mortgage broker earns commissions from a lender when they recommend the lender’s loan product to a borrower. BID ensured that the broker only recommends the loan that best suits the borrower’s requirements and does not prioritise commission percentage.
It is also essential for a broker to disclose why he chooses a loan product from a lender who is not empanelled with him but offers better loan products that meet the borrower’s exact requirements.
Safeguard the consumer’s interest
The government wanted to safeguard borrowers from unethical practices affecting their loans and processes, thereby increasing accountability, transparency, and trust in the mortgage space.
Why is BID being talked about now?
The ASIC has started its first targeted post-implementation review in mid-2025 and has since progressed, following its implementation in 2021, to assess how mortgage brokers are applying the regulations when handling their customers.
While several findings were revealed during the review, it mainly highlighted the importance of documentation and bookkeeping, how the recommendation of a mortgage broker aligns with client interests, and the need to monitor licensees, ensuring they have regulated processes and documented proof.
The ASIC, in a recent event conducted by the MFAA, has mentioned that it has started assessing industry practices to identify varied compliance behaviours.
While the ASIC is expected to release the findings of the BID review later in 2026, the MFAA is raising awareness of the BID compliance review through webinars in the coming months.
What are the takeaways for a mortgage broker?
The ASIC, reviewing the BID compliance with mortgage brokers, indicates that mortgage brokers will be under increased regulatory scrutiny, they need to focus more on documentation quality, and they need to improve their focus on clients’ preferences and stay aligned with them. If you are a mortgage broker looking to outsource your back-office tasks amid the increased scrutiny on protecting the best interests of your clients, reach out to us.
