ASIC releases Best Interest Review findings

In essence, the BID requires mortgage brokers to act in the best interests of consumers and for licensees to take reasonable steps to ensure their representatives do so.

The landmark report - Mortgage brokers: Review of best interests duties and complaints handling practices - is the culmination of a multi-stage information-gathering exercise launched by ASIC in mid-2025 and evaluates how credit licensees and aggregator groups oversee compliance with BID and Internal Dispute Resolution (IDR) obligations.

ASIC reviewed 13 Australian Credit Licensees representing eight large mortgage broker aggregator groups, covering approximately two-thirds (66 per cent) of all credit representatives across Australia.

The review comes as brokers account for more than 80 per cent of home loans, with ASIC pointing to the sector’s influence on borrowing decisions and household finances.

The eight aggregator groups covered in the review comprise:

• Yellow Brick Road Group
• Australian Finance Group
• Lendi Group
• Connective
• LMG
• Finsure
• outsource Financial
• Mortgage Choice

Overall, the regulator found that aggregators had appropriate policies to support compliance with legal obligations and did not find any widespread crisis or evidence of systemic failures across the broking industry.

In fact, the regulator explicitly opened by giving the sector a baseline pass on its core frameworks, noting that licensees "generally had processes that were designed to support compliance with legal obligations" and confirming that brokers did not appear to be directing clients toward lenders that paid higher commissions.

However, it did find some room for improvement when it came to appropriate documentation, file keeping and wide-ranging compliance and complaints handling standards.

ASIC commissioner Alan Kirkland said the review showed that existing processes needed to deliver more consistent outcomes for consumers, with the quality of brokers’ recommendations central to maintaining confidence in the industry.

“Acting in customers best interests is fundamental to trust in the mortgage broking industry. Consumers rely on brokers to help them navigate a complex market and recommend products that meet their needs,” Kirkland noted.

What did ASIC look at?

To evaluate how the mortgage broking sector adheres to its legal obligations, ASIC reviewed more than 7,000 documents provided by the aggregators.

It gathered data and documentation spanning 1 April 2023 to 31 March 2025, which included:

• Loan flows to different lenders
• Lender product details, promotions and loan approval or service times
• Two sample sets totaling 1,600 loan application files from aggregators specifically focusing on recommendations where the broker did not recommend the cheapest shortlisted loan, as well as recommendations where only a single loan option was presented).
• Extracts of complaint registers comprising over 400 complaints relating to alleged Best Interests Duty (BID) or conflict-of-interest failures
• Quality assurance audits undertaken by aggregators, including advertise findings and action taken.

It then evaluated loan flow and remuneration data across lenders, and observed live demonstrations of the software platforms, product filtering engines, and compliance management systems aggregators use to compare products, present options to consumers, and oversee broker conduct.

Overall, the financial regulator found that credit licensees generally had processes designed to support compliance with legal obligations, and had clearly documented processes for collecting consumer information.

What can be improved?

However, the review identified three main areas for improvement :

1. Strengthening processes for ensuring brokers comply with BID, particularly when recommended loans are significantly more costly than other options available to the consumer.
2. Developing more mature complaints handling and internal dispute resolution practices
3. Enhancing systems and data for overseeing representatives, monitoring credit assistance quality, and identifying potential conduct risks.

Demonstrating compliance with BID when more costly loans are recommended

ASIC found that licensee policies broadly aligned with Regulatory Guide 273 (RG 273), with brokers generally presenting three loan options.

On average, it found that brokers only recommended a single loan in just 6.8 per cent of cases (primarily due to customer preference, or limitations such as non-standard income servicing or specific lender policies).

The proportion of cases involving only one option differed markedly between groups, ranging from just under 1 per cent to just over 15 per cent. ASIC also identified files where it could not establish why alternatives had not been presented.

However, data across seven of the eight aggregator groups revealed that between 1 April 2023 and 31 March 2025, brokers recommended a loan that wasn’t the lowest-cost option in over 20 per cent of cases.

This was largely driven by consumer priorities, such as offset or redraw facilities, quick turnaround times, or existing lender preferences.

While cost isn’t the only matter relevant to a loan being in a consumer’s best interests, ASIC said it was important that brokers could demonstrate the value of loan features that gave the borrower greater value

Kirkland said borrowers needed a clear explanation of the benefits underpinning a higher-cost recommendation.

“Where a broker recommends a loan that costs more than the available alternatives, consumers should be able to clearly understand why that recommendation delivers greater value for their circumstances,” Kirkland said.

However, ASIC did have some concerns about broker reasoning for recommending a loan that wasn’t the cheapest option, particularly if the difference was more than $20,000.

ASIC warned that file sampling of these loan files exposed severe record-keeping deficiencies as well as differences in how brokers were calculating loan costs. For example, most were considering cost over the full 30-year term of the loans, while others were considering it over five years in order to more closely reflect how long most consumers tend to stay in one loan.

"Some brokers recommended loans that were significantly more costly and did not clearly document why those loans were in the consumer's best interests," the report stated.

ASIC added that file notes frequently contained generic justifications, lacked detailed cost comparison notes, or relied on boilerplate statements that could apply to any borrower. There was also some instances where there was apparent inconsistency with the consumer’s stated preferences or requirements.

The regulator also found that two of the eight aggregator groups could not readily extract data from their loan comparison software on the total cost of the different loan options - and had to rely on manual review. For example, it was hard to determine whether interest rates were based on the rate the consumer was expected to receive after costs and discounts, or the carded rate. This was because brokers had to manually input any discounts agreed to be reflected in the comparison tool.

Monitoring and supervisory flaws

ASIC found that aggregators had specific teams for implementing and overseeing controls to ensure compliance, as well as preventative controls built into workflow software (such as mandatory fields to capture customer objectives), too.

But it noted that some compliance review methodologies were vague (i.e. did not provide a step-by-step process for staff to follow), checklists were not consistently completed and stored to credit assistance files, detailed reasoning behind individual reviews was not always evident, and monitoring systems focused heavily on procedural tick-box compliance rather than substantive loan costs.

Kirkland said licensee oversight needed to examine the evidence supporting recommendations where cheaper alternatives were available, with larger differences in cost requiring a more compelling justification.

“Licensees should closely monitor recommendations made by brokers operating under their licence, particularly where a lower-cost loan is available. The greater the cost difference, the stronger the evidence needed to show the recommendation is in the consumer's best interests," he said.

Among the issues missed by auditors or absent from licensee policies were package-fee cost–benefit assessments, retirement exit strategies disconnected from borrowers’ financial positions, and promises to secure rate changes after settlement.

ASIC said auditors needed to establish whether promised post-settlement improvements had actually materialised, rather than accepting those assurances at face value.

“Reviewers should closely scrutinise statements made by the broker offering to secure changes to the loan after settlement to see if the proposed reduction was actually received," the report read.

The review also revealed limited evidence of systematic follow-up on adverse file findings, leaving it unclear whether identified non-compliance was ever remediated through feedback or retraining.

Furthermore, ASIC raised validity concerns of the data after discovering that two aggregators provided brokers with 72 hours' advance notice before reviewing files and some concerns about potential backdating of key disclosure documents.

The scope of supervision also fell short at three of the eight aggregator groups, whose file-review programs did not cover all credit assistance. Although every licensee reviewed settled loans, some excluded applications that did not proceed or were withdrawn or declined.

ASIC said an application’s failure to reach settlement did not remove the credit assistance from the scope of compliance oversight.

“All regulated activities – including the provision of credit assistance even when a loan application does not ultimately proceed – should be in scope for licensees’ compliance processes (such as file reviews)," ASIC said.

Beyond gaps in audit coverage, ASIC found that some brokers needed repeated reminders over several months to complete remedial tasks. In other cases, it received no evidence that the work had been completed.

The regulator also questioned whether repairing individual files adequately addressed borrower harm or wider compliance problems, warning against treating remediation solely as a paperwork exercise.

“Overall, licensees’ responses to adverse findings appeared to be largely process driven and focused on retrospective compliance by the individual representative and files reviewed. This approach is not suitable for identifying potential consumer detriment that may have occurred or addressing broader compliance issues that may exist," the report noted.

ASIC also found that licensees had not clearly identified the circumstances in which broker conduct could cause consumer detriment, and their compliance procedures did not clearly document the notification, investigation and remediation obligations under sections 51A, 51B and 51C of the National Credit Act.

There were also examples of stronger intervention, with serious matters referred to investigation teams and, in some cases, representatives removed from an aggregator’s licence. Some licensees had revised their frameworks to clarify escalation pathways and prevent concerning behaviour recurring.

IDR underreporting and resourcing friction

Complaints handling emerged as a major vulnerability. ASIC found that IDR complaints were underreported by broker representatives to aggregators, as well as by aggregators to ASIC.

While direct head-office complaint handling yielded higher compliance with regulatory guidance due to specialised expertise and objective assessment, half of the eight aggregator groups maintained only one or two dedicated complaints-handling staff members. ASIC found that in some cases under-resourcing caused investigation backlogs, missing regulatory details in responses, data quality errors, and instances where complaints were improperly marked as withdrawn.

Kirkland warned that failures to identify complaints, investigate them fully or progress them without delay could weaken consumers’ confidence in the process available to resolve their concerns.

“Our review found complaints being missed, withdrawn without being fully investigated, or delayed. When complaints are not handled properly, confidence in the complaints process can be undermined," he said.

The review also found that best interests duty complaints took longer to resolve than other complaints. Kirkland said borrowers questioning a home loan recommendation should be able to expect their concerns to receive timely consideration.

“When customers raise concerns about a home loan recommendation, they should expect those concerns to be considered and resolved promptly,” Kirkland outlined.

Remuneration and data quality

Notably, ASIC observed that brokers generally received similar commissions for standard home loans and did not favour higher-commission lenders. However, data regarding commission splits and clawbacks was not consistently stored in easily extractable formats.

"Good quality and timely data is essential for licensees to manage their conduct risk," ASIC noted.

The data gaps extended beyond remuneration. Most licensees could not supply a complete historical record of available home loan products, while some relied almost entirely on external providers to produce their data.

Most also reported difficulty extracting complete application-outcome data, and some warned that recorded recommendations could differ from the products ultimately settled, with changes to rates or product types going unrecorded.

ASIC linked that lack of visibility to weaknesses in broker supervision, stressing that recommendation records alone did not provide a complete account of the lending process.

“If licensees cannot access timely and complete data about outcomes of loan applications, they cannot use that information to supervise individual brokers," ASIC said.

Recommended actions

The regulator suggested that licensees implement the following actions to lift compliance:

Identifying higher-cost loan recommendations

Action: Licensees should ensure they can readily identify loan recommendations with limited or no recorded rationale and that are not for the cheapest loan compared.

Evidence for higher-cost recommendations

Action: Licensees should expect their representatives to provide additional evidence and justification when recommending a loan that will cost more than other available options.

Capturing recommendation data

ASIC also called for systems to accurately record the discounts, promotional offers, cashbacks and application-processing timeframes relevant to loan recommendations.

Periodic reviews

Action: Licensees should periodically review their key risk indicators to ensure they are appropriate for monitoring compliance with the best interests duty.

Guidance for complex lending scenarios

Action: Licensees should ensure they have internal guidance and training materials, particularly for complex or challenging lending scenarios.

Considering appropriateness

Action: File reviews should consider not only whether brokers formally comply with process requirements,but also whether reasons and recommended loans are appropriate.

Following up adverse review findings and remediation

Action: Licensees should ensure adverse review findings are followed up and addressed with individual brokers and any consumer detriment is remediated, and consider whether findings reflect broader compliance issues.

Reviewing Internal Dispute Resolution (IDR) processes

Action: Licensees should improve how they identify complaints and ensure accurate IDR data is reported to ASIC.

Licensees should ensure adverse review findings are followed up and addressed with individual brokers and any consumer detriment is remediated and consider whether findings reflect broader compliance issues.

Unless a complaint is genuinely withdrawn by the complainants, licensees should respond to all complaints in a manner that is consistent with the requirements of RG 271.

Licensees should regularly assess how their IDR processes are performing, including:

• potential missed or unreported complaints arising from brokers interacting directly with consumers
• compliance with timeframe and notification requirements in RG 271
• system and resource adequacy, and
• accessibility, ease and flexibility of complaint lodgement.

Treating data as critical to risk management

Action: Licensees should treat data as critical to the management of risk and ensure they have ready access to:

• current and historical product data, including interest rates, fees and charges
• loan recommendation records showing anticipated consumer costs
• loan application outcomes for each recommendation, and
• current and historical lender remuneration, including commissions, other remuneration and clawback terms.

Licensees should use this data to monitor for risks that brokers may not be acting in the best interests of individual consumers. Risks that could be prioritised for monitoring include:

• compliance with legal requirements and adherence to the licensees' internal policies (e.g. mandatory completion of required workflows)
• quality of credit assistance, including the substantive reasoning for loan recommendations and the cost of products recommended compared to alternatives available
• unexplained concentration of loans with individual lenders, and
• any evidence individual brokers may be prioritising their own interests over the interests of consumers – for example, by directing loans to lenders with higher commission.

ASIC said that the findings must serve as a template for all aggregators.

"All mortgage broker licensees should use the findings in this report to assess whether they need to change their own practices."

“Consumers place significant trust in mortgage brokers. Strong supervision, effective monitoring and robust complaints handling help ensure that trust is well placed," Kirkland said.

[Related: ASIC to release best interests duty report by Q4]