Legislation passes to impose mortgage broker best interest duty

7 February 2020

The Royal Commission-based legislation changing mortgage broker commission arrangements and imposing a client best interest duty have passed the Parliament.

The Treasurer, Josh Frydenberg, said that the changes were contained in the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2019 Measures) Bill 2019.

The legislation covers the Royal Commission recommendation that mortgage brokers be required to act in the best interests of consumers when providing consumer credit assistance.

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As well, it also covers off the Royal Commissions recommended reforms to mortgage broker remuneration by requiring the value of upfront commissions to be linked to the amount drawn down by the borrowers instead of the loan amount, alongside the banning of campaign and volume-based commissions and payments and capping soft dollar benefits.

The changes bring the regulatory environment for mortgage brokers more broadly into line with those of financial advisers.

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Mortgage Brokers should not be overly concerned. The FinTech industry has been quietly preparing for this moment. There is plenty of low-cost digital tools the broker can use to demonstrate they are working in the client's best interest as I am sure 99.9% already are doing.

Quite often its the lenders policy that dictates where the loan goes anyway. This is probably more case of further red tape for the sake of it, and a bit of PR for the government. Maybe the BID needs to be extended to Politicians....

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