iscover 
The Australian Securities and Investments Commission (ASIC) has released its landmark review into how the broking sector complies with the best interests duty (BID) and internal dispute resolution (IDR) obligations.
It marks the first comprehensive audit of the BID obligation since its inception in 2021.
The Mortgage brokers: Review of best interests duties and complaints handling practices report evaluated 13 credit licensees across eight major aggregator groups, covering roughly two-thirds of all credit representatives in Australia.
The aggregators were:
- Australian Finance Group (AFG)
- Connective
- Finsure Finance
- Lendi Group
- Loan Market Group (LMG)
- Mortgage Choice
- outsource Financial
- Yellow Brick Road
While ASIC confirmed that aggregators generally have appropriate compliance frameworks in place and found no evidence that brokers direct clients to lenders paying higher commissions, it flagged critical vulnerabilities in file documentation, complaint escalation, and record-keeping.
The regulator particularly flagged that more detailed and personalised evidence was needed to justify loan recommendations when the cheapest loan wasn’t recommended to the borrower, noting that some file reviews exposed severe deficiencies in record-keeping, including generic justifications, boilerplate language, and a lack of detailed cost comparisons.
Beyond file documentation, the review highlighted that supervisory audits from aggregators relied too heavily on procedural “tick-box” compliance rather than evaluating advice quality, with minimal follow-up or remediation on adverse findings.
Complaints handling also emerged as an area where improvements could be made, characterised by underreporting of disputes by brokers, under-resourced internal resolution teams, omissions of mandatory Australian Financial Complaints Authority (AFCA) escalation details, and instances where unresolved complaints were improperly marked as withdrawn.
Finally, while ASIC verified that brokers were not steering clients to lenders that offer higher commissions (demonstrating compliance with the conflict of interest guardrails), it identified significant data management failures, noting that aggregators failed to maintain extractable records of commissions, splits, and clawbacks required to effectively track and manage ongoing conduct risks.
Here are the main findings and action points from the ASIC review:
1. Documenting higher-cost loan recommendations
ASIC’s review revealed that in over 20 per cent of cases, brokers recommended a loan that was not the cheapest option in market. While non-cost factors like offset accounts, turnaround times, or customer lender preferences were found to be valid reasons, ASIC warned that file note quality on the rationale dropped significantly when cost gaps widen.
Where the projected cost difference over a five-year period exceeded $20,000, ASIC had “most concerns” with 43.9 per cent of the broker recommendations reviewed. Key deficiencies included generic file notes, boilerplate statements, a lack of detailed cost comparisons, and failures to clearly document why a higher-cost option was in the client’s best interest.
ASIC therefore recommended that licensees should expect their representatives to provide additional evidence and justification when recommending a loan that will cost more than other available options.
It also said that licensees should ensure they can readily identify loan recommendations with limited or no recorded rationale and that are not for the cheapest loan compared.
2. Single loan recommendations
In around 6.8 per cent of cases reviewed, brokers presented only a single loan option to the client. While ASIC recognised valid drivers for this, such as top-ups on existing mortgages, non-standard income servicing, or strict lender policies, it was concerned that documentation for single-option presentations was frequently incomplete.
Furthermore, while aggregator policies broadly aligned with Regulatory Guide 273 (RG 273), ASIC observed significant gaps in training and guidance for non-standard scenarios such as debt consolidation, construction loans, and income policy restrictions.
ASIC therefore recommended that licensees should ensure they have internal guidance and training materials, particularly for complex or challenging lending scenarios.
3. IDR underreporting
Complaints handling emerged as a growing area of non-compliance. ASIC identified widespread underreporting of IDR complaints by individual brokers to aggregators, as well as by aggregators to ASIC.
The review observed that compliance with Regulatory Guide 271 (RG 271) fell significantly when individual credit representatives managed complaints informally at the front line. Identified issues included omitting mandatory information regarding escalation rights to AFCA, missing response deadlines, and improperly categorising unresolved complaints as withdrawn.
ASIC therefore recommended that licensees should improve how they identify complaints and ensure accurate IDR data is reported to ASIC. It noted that unless a complaint is genuinely withdrawn by complainants, licensees must respond to all complaints in a manner consistent with RG 271.
The regulator also recommended that 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 time frame and notification requirements in RG 271.
- System and resource adequacy.
- Accessibility, ease and flexibility of complaint lodgement.
4. Over-reliance on ’tick-box’ audits
One of the areas that ASIC criticised aggregators for was how they managed existing quality assurance audits. It suggested that several were focusing predominantly on procedural tick-box compliance (such as verifying file upload completion) rather than assessing the substantive quality or veracity of advice.
The regulator also highlighted gaps in supervisory follow-up, noting that adverse audit findings from licensees rarely triggered broader remediation or root-cause reviews beyond basic requests for missing documents.
ASIC therefore recommended that file reviews should consider not only whether brokers formally comply with process requirements but also whether reasons and recommended loans are appropriate.
It further recommended that licensees should ensure adverse review findings are followed up and addressed with individual brokers and any consumer detriment is remediated, as well as consider whether findings reflect broader compliance issues.
Additionally, the regulator recommended that licensees periodically review their key risk indicators to ensure they are appropriate for monitoring compliance with the best interests duty.
5. Remuneration visibility and risk monitoring
Although ASIC observed that brokers generally received similar commissions for standard home loans and did not steer clients towards higher-paying lenders, data regarding commission splits and clawbacks was not consistently stored in easily extractable formats.
The regulator therefore recommended that 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.
- Current and historical lender remuneration, including commissions, other remuneration and clawback terms.
It said that 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 internal policies (e.g. mandatory completion of required workflows).
- Quality of credit assistance, including substantive reasoning for loan recommendations and product cost compared to available alternatives.
- Unexplained concentration of loans with individual lenders.
- 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.
The report reads: “More than 80 per cent of home loans are currently provided through mortgage brokers, giving them significant influence over consumers’ borrowing decisions and financial outcomes. As at December 2025, households taking out a new mortgage were spending around 45 per cent of the median household income on repayments. With so much at stake financially, it is critical that brokers act in consumers’ best interests when helping them choose the right home loan...
“We found that the licensees generally had processes that were designed to support compliance with legal obligations. However, we identified opportunities for improvements to:
- Strengthen their processes for ensuring their representatives comply with the best interests duty, particularly where the expected costs of the loan recommended are significantly more than other loans available to the consumer.
- Develop more mature practices for receiving and handling complaints to ensure compliance with their internal dispute resolution obligations in Regulatory Guide 271 Internal dispute resolution (RG 271).
- Enhance their systems and data for overseeing their representatives, monitoring the quality of credit assistance and identifying potential misconduct.
“All mortgage broker licensees should use the findings in this report to assess whether they need to change their own practices,” it said.
Commenting on the findings, ASIC commissioner Alan Kirkland said that while the review found brokers did have existing practices to facilitate BID compliance, the industry could do more to ensure those processes were delivered consistently.
“More than 80 per cent of home loans are now arranged through mortgage brokers. With that level of influence comes an obligation to act in consumers’ best interests when recommending a loan,” he said.
“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.
“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.
“Consumers place significant trust in mortgage brokers. Strong supervision, effective monitoring and robust complaints handling help ensure that trust is well placed.”
[Related: MFAA flags ‘critical time’ for brokers as BID review advances]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.
Annie Kane
Author
Annie Kane is the managing editor of Momentum's mortgages titles: The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
Annie has a degree in English Literature and Music from the University of Sheffield and is a Mental Health First Aider (MHFAider®).
Email Annie at: