ob体育 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 . 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 鈥� 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 ob体育鈥檚 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, ob体育 Commissioner Sean Hughes said, 鈥楾hese 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. ob体育 supports that objective.
鈥楥onsumers rightly expect mortgage brokers to act in their best interests and ob体育鈥檚 guidance describes how we expect them to do so. Under these new obligations, let there be no doubt 鈥� the consumer must always come first.
鈥榃e 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.鈥�
From 1 January 2021, ob体育 will closely monitor conduct and outcomes to ensure mortgage brokers are complying effectively with the best interests duty.
Alongside the new guidance, ob体育 has also published a report responding to feedback received during the consultation process (REP 662).
Download
- Regulatory Guide 273 Mortgage brokers: Best interests duty
- Report 662聽Response to submissions on Consultation Paper 327 Implementing the Royal Commission recommendations: Mortgage brokers and the best interests duty (CP 327)
- Submissions to CP 327
Background
In February 2020, the Parliament passed the Financial Sector Reform (Hayne Royal Commission Response鈥擯rotecting Consumers (2019 Measures) Act 2020, which introduced a best interests duty for mortgage brokers in response to Recommendation 1.2 of the Royal Commission. The duty is a statement of principle which seeks to align the interests of the mortgage broker with the interests and expectations of the consumer.
ob体育's guidance will help mortgage brokers to comply with these legal obligations by setting out ob体育's views on what the best interests duty provisions require and suggest the steps that can minimise the risk of non-compliance.
The guidance is structured around the key steps common to the credit assistance process of brokers, such as gathering information, individually assessing products, and presenting information and recommendations to the consumer.
The obligations were initially due to commence on 1 July 2019, but ob体育 has provided a temporary exemption for six months in light of the effect of COVID-19 on the financial system.
ob体育 consulted on draft guidance (CP 327) in February/March 2020. The submissions received in response to CP 327 helped to inform ob体育鈥檚 final guidance in Regulatory Guide 273. ob体育 has published a feedback report, in response to the submissions received on CP 327, which outlines the changes made to the draft guidance and addresses stakeholder feedback.
Editor's note
On 26 June 2020, this media release was updated to correct the date at which Parliament passed the Financial Sector Reform (Hayne Royal Commission Response鈥擯rotecting Consumers (2019 Measures) Act 2020.