Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

CIF to propose ‘customer first duty’ for brokers

magnifying people ta magnifying people ta
Reporter 6 minute read

The Combined Industry Forum has agreed “in principle” to extend its good consumer outcomes requirement to incorporate a “conflicts priority rule” as a “customer first duty”.

In its interim report, released on Monday (27 August), the Combined Industry Forum (CIF) stated that throughout 2018, it has been considering ways to build upon its good customer outcomes reforms published in its response to the Australian Securities and Investments Commission’s review into mortgage broker remuneration.

In its review, ASIC noted that a broker would satisfy the requirement if the “customer has obtained a loan which is appropriate [in terms of size and structure], is affordable, applied for in a compliant manner and meets the customer’s set of objectives at the time of seeking the loan”.

However, the CIF has proposed that the provision could be extended to include a “conflicts priority rule”.


“The ‘conflict priority rule’ could be formulated as a requirement for the customer’s interests to be placed above the providers, or those of their organisation, based on the information reasonably known to the provider, at the time of providing the service,” the CIF noted.

“The effect of this approach would be a requirement to place the customer’s interests first. The combination of the good customer outcome definition and a customer first duty allows both an easy-to-follow principle — put the customer’s interests first — and structure to follow for brokers when assessing loan suitability.”

The CIF added that further governance metrics could be built for “monitoring and oversight”.

However, the CIF acknowledged that the development and application of the customer first duty is “multifaceted and complex”, noting that “there may be unknown impacts”.

“These include the potential for limiting access to credit, and a disproportionate impact on smaller and regional lenders if lender panels require rationalisation,” the CIF continued.


The CIF noted that it had “not yet settled on a final position”, but claimed that the reform should be underpinned by the following principles:

  • placing the customer first, and having “good” consumer outcomes at the centre of its approach
  • fit for purpose for the mortgage broking industry, considering the nature of services provided, the form of conflicts of interests inherent to the industry, the current evidence of risks to customer outcomes, and considering the current regulatory framework
  • promoting competition, and ensuring that no part of the value chain is unfairly disadvantaged
  • all parts of the value chain will have a role to play to support the implementation and monitoring of the customer duty
  • providing transparency for all participants
  • promoting simple, achievable solutions

Finally, the CIF concluded that it is “aware that there is merit in moving a customer first principle from an implicit expectation to an explicit statement that a customer and mortgage advice provider can easily understand”.

The report also outlined the CIF’s progress in implementing other reforms proposed in its response to ASIC, which include the standardisation of commission payments, the removal of bonus commissions, the removal of “soft dollar payments” and the drafting of the “Mortgage Broking Industry Code”.

More to come.

[Related: CEO warns against ‘dangerous’, ‘knee-jerk’ broking reform]

CIF to propose ‘customer first duty’ for brokers
magnifying people ta
TheAdviser logo

If you have ever considered how you could better service your SME clients but lack the knowledge or confidence to do this beyond referring them on, this is a must-attend event for you. Don't miss SME Broker Bootcamp, a jam-packed, free-to-attend, practical workshop. Register today and secure your place at this interactive, flexible, must-attend event.

magnifying people ta


more from the adviser
regulation rules

Breaking News

Broker feedback wanted on ‘complex’ financial services legislation

The Australian Law Reform Commission has sought opinions from bro...

small business owner ta

Breaking News

Compliance, cash flow top SME stresses: ScotPac

Concerns around navigating government grants, cash flow, and “s...

money savings super

Breaking News

SA government rolls out COVID stimulus package

The state has started distributing cash grants to businesses affe...