ASIC FAQs - November 2020

This update includes responses to the following questions relating to panels:

  1. How many credit providers should a broker have on their panel?
  2. What if a broker only has one credit provider on their panel that provides a certain product, for example, reverse mortgages?
  3. Does a broker have to consider credit products on the market they do not have access to?
  4. How do the best interests duty and the conflict priority rule apply to recommending white label products?
  5. Some Government schemes can only be accessed through certain credit providers, what if a broker does not have access to those providers?

Panels                                                                       

How many credit providers should a broker have on their panel?            

The law and our guidance on it (Regulatory Guide 273 Mortgage brokers: Best interests duty (RG 273)) do not prescribe a certain number of providers, or what the composition of a broker’s panel should be. Brokers are best placed to use their judgment to determine whether their panel is sufficient to meet their consumers’ best interests. This is something ASIC expects brokers to do.

Brokers may find it helpful to periodically review their panel to determine whether the credit providers and products they have access to provide a reasonably representative selection of the market in which the broker operates.

There may be situations where a consumer wants a certain type of product, or a certain type of provider. If the broker does not have access to those type of products or providers, we expect that the broker informs the consumer of their aggregator’s panel composition, or the broker’s accreditation limitations. This situation may be especially relevant to brokers who operate in niche markets, or who are accredited with fewer providers.

If the broker is not satisfied that the products and providers they can access and recommend will allow them to act in the consumer’s best interests, the broker must not provide credit assistance to that consumer.

What if a broker only has one credit provider on their panel that provides a certain product, for example, reverse mortgages?

Brokers should be accredited with a reasonably representative panel of credit providers. What is ‘reasonably representative’ will vary based on the market a broker operates in. If a broker operates in a market with fewer credit providers and products, having more limited lender accreditations may be sufficient.

In the situation where the broker is only accredited with one provider for a specific product, the broker should explain that to the consumer and inform the consumer that other providers do exist. The broker should also take care with statements about the extent to which they have ‘searched the market’. Brokers should keep records of these conversations with the consumer.

In a situation where a broker does not have access to a credit provider that provides a specific product that the consumer is interested in, RG 273 at paragraph 114 states:

You are not necessarily required to recommend a specific product outside your panel. If a consumer is interested in a product from a credit provider that is on your aggregator’s marketing material, but you do not have access to that provider, you should tell the consumer this.

There may be situations where a broker does not have the accreditation to recommend a product from a certain provider that is on their aggregator’s panel, and the consumer’s application is time sensitive. Where the accreditation cannot be obtained in time it might be preferable that a broker refer the consumer to another broker who has the accreditation.

Does a broker have to consider credit products on the market they do not have access to?

Brokers are not necessarily required to assess the whole market for each consumer.

Instead, brokers should have a general awareness of products and features available in the market and periodically compare these to the products and features the broker can access and recommend. This might help a broker determine whether their panel and accreditations are sufficient for them to act in their consumers’ best interests.

There might be instances where a broker considers that a particular product from a provider they do not have accreditation for would be in the consumer’s best interests. This could be based on the consumer’s circumstances, or their preference for a certain type of product from a particular provider (where the broker has determined that type of product would be in the consumer’s best interests). In these situations, the broker might:

  • recommend a comparable product that would be in the consumer’s best interests from a provider on-panel and explain to the consumer the differences between what is being recommended and the product offered by the provider the consumer has requested. The details of this recommendation and explanation should be recorded by the broker.
  • seek accreditation with the consumer’s preferred provider.
  • refer the consumer to a broker who has accreditation for that provider and product, or refer the consumer to the credit provider directly.

How do the best interests duty and the conflict priority rule apply to recommending white label products?

The Replacement Explanatory Memorandum at paragraph 3.25 provides:

… a broker would not suggest, from their aggregator’s panel of lenders, a white label home loan that has the same features as a branded product from the same lender, but with a higher interest rate, because it would not be in the best interests of the consumer to pay more for an otherwise similar product …

Paragraph 147 of RG 273 states that brokers must not recommend products:

that would create extra revenue for [themselves], [their] credit licensee or another related party, unless doing so would also be in the consumer’s best interests.

When recommending white label products, as with any other product, brokers must ensure that they are doing so in the best interests of the consumer. Brokers should also consider if recommending the white label product poses a conflict of interest and if so, what a broker in the same position but without a conflict of interest would do.

Some Government schemes can only be accessed through certain credit providers, what if a broker does not have access to those providers?

If a broker does not have any providers on their panel through which certain Government schemes can be accessed, it is important that the broker informs the consumer of this, and provide information as to other types of incentives and grants that the consumer may be eligible for.

Sometimes, a scheme may give such a benefit that it would not be in the best interests of the consumer to recommend an alternative product or credit provider. In this situation, if the broker cannot access the credit provider’s products, they should refer the consumer to brokers who do have those providers on their panel, or to the credit provider directly.


This update includes responses to the following questions relating to the reasonable steps obligation:

  1. What is the reasonable steps obligation?
  2. How can a licensee demonstrate that they have taken reasonable steps?
  3. If a broker has not breached their best interests duty or the conflict priority rule, for example, is it still possible that the licensee might have failed to take reasonable steps?
  4. If a broker breaches the best interests duty, will that always mean that the licensee has also breached their obligation to take reasonable steps?
  5. How important is the reasonable steps obligation?

Reasonable steps obligation

What is the reasonable steps obligation?

Credit licensees must take reasonable steps to ensure their credit representatives comply with the best interests duty and related obligations including the conflict priority rule and the ban on conflicted remuneration.

‘Reasonable steps’ include the processes a licensee develops to help their brokers comply with the obligations. What constitutes reasonable steps will vary depending on the nature and scale of the broker’s operations, and their relationship with the licensee.

We generally expect that licensees will:

  • ensure that their brokers are adequately trained and competent.
  • provide systems, guidelines and other materials to ensure that brokers understand and comply with the best interests duty and related obligations, including the conflict priority rule and the ban on conflicted remuneration.
  • monitor compliance.
  • ensure that appropriate records are kept, which demonstrate the broker’s compliance with the obligations.
  • ensure that appropriate records are kept, which demonstrate the reasonable steps the licensee has taken.

How can a licensee demonstrate that they have taken reasonable steps?

As stated above, keeping appropriate records is especially important. For licensees, this means keeping records of the steps they have taken to ensure their brokers comply with the best interests duty and related obligations. However, records kept by brokers are likely to be important for licensees when seeking to monitor and ensure their brokers comply.

Records the licensee keeps may indicate what the licensee will do to ensure the brokers are trained and competent, how they will monitor compliance and whether there are any triggers for additional steps or further actions. For example, such steps or actions could be based on matters such as the risk of non-compliance and harm that would result from any non-compliance.

Real time monitoring and automated analysis of trends in a representative’s credit assistance are examples of ways credit licensees can use technology to demonstrate that they have taken reasonable steps to ensure their representatives are complying with the obligations.

We have provided examples in Regulatory Guide 273 Mortgage brokers: Best interests duty which are intended to illustrate some of the issues licensees may need to consider in order to demonstrate they have complied with their reasonable steps obligations.

If a broker has not breached the best interests duty or the conflict priority rule, is it still possible that the licensee might have failed to take reasonable steps?

Yes. The reasonable steps obligation requires licensees take proactive steps to ensure compliance, rather than simply respond to contraventions after they have already happened. The Replacement Explanatory Memorandum at paragraph 3.31 provides:

Failure to take reasonable steps would include a failure to respond to or address identified problems that create a risk of contravention; that is, licensees will need to act to prevent contraventions of the law, and not simply respond to contraventions once they have happened.

Similarly, in Australian Securities and Investments Commission v AMP Financial Planning Pty Ltd (No 2) [2020] FCA 69 at [105], in the context of a different reasonable steps obligation, the court interpreted “ensure” to be forward-looking and to be:

… directed to the taking of steps to achieve compliance with certain statutory norms (including the best interests obligations) before any particular instance of non-compliance has arisen.

The interpretation of “ensure” in the AMP case related to the obligation on financial services licensees to take reasonable steps to ensure that their representatives comply with the best interests duty, the provision of appropriate advice, requirement to give warnings to clients and the conflict priority rule (s961L of the Corporations Act 2001). That obligation, and the obligations in the National Credit Act, are worded in a similar way.

If there are reasonable steps the licensee should have taken but did not, but the broker has not breached the best interests duty or other obligations as a result, the licensee may nonetheless have failed to meet their legal obligations. For example, there may be a scenario where a licensee provides platform software to its brokers that prioritises products from a related party. This may be inconsistent with the licensee’s obligation to take reasonable steps to ensure its brokers comply with the conflict priority rule.

If a broker breaches the best interests duty, will that always mean that the licensee has also breached their obligation to take reasonable steps?

No. If a broker fails to comply with the best interests duty, this does not necessarily mean that the licensee has failed to take reasonable steps. For example, there may not have been any reasonable steps the licensee could have taken that would have ensured the broker’s compliance with the best interests duty.

The judgment in the AMP case indicates that, where there is a breach, licensees may need to respond and take steps to ensure that other representatives comply with their obligations. If a broker breaches the best interests duty, the licensee should take reasonable steps to avoid similar breaches from occurring. These steps could include the licensee issuing a policy (or other communication) to its brokers, revising broker training or communications and reviewing or revising its monitoring and supervision programs.

How important is the reasonable steps obligation?

We consider that complying with the reasonable steps obligation is an important component of the reforms.

Failing to take reasonable steps may attract the same civil penalty as failing to act in the best interests of the consumer, failing to prioritise the consumer’s interests when providing credit assistance, or failing to comply with the ban on conflicted remuneration.


This update includes responses to the following questions relating to the conflict priority rule:

  1. What should brokers do to comply with the conflict priority rule?
  2. Does the conflict priority rule only apply where one lender pays a higher commission?
  3. How does the conflict priority rule relate to referral arrangements?
  4. Does the conflict priority rule apply to products or services which are incidental to the credit assistance, such as insurance?

Conflict priority rule                                                

What should brokers do to comply with the conflict priority rule?           

Brokers and their related parties must consider what interests they have. When an interest does not align with the interests of the consumer, a broker should look at what a non-conflicted broker would do in their position.

When providing credit assistance, a broker must not recommend a product (including of a related party) on the basis that it would create extra revenue or some other benefit for themselves, their credit licensee or another related party. The only basis for doing so is if it would also be in the consumer’s best interests. The Replacement Explanatory Memorandum at paragraph 3.25 provides:

… any recommendations made would be expected to be based on consumer benefits, rather than benefits that may be realised by the broker; that is, a broker should not recommend a loan by prioritising factors that cannot be substantiated as delivering benefits to that particular consumer (such as the broker’s relationship with the lender), over factors and features which affect the cost of the product or are more relevant to the consumer …

The Replacement Explanatory Memorandum at paragraph 3.25 also provides an example of how the conflict priority rule might operate in a common refinancing scenario:

… during a periodic review, a broker would not suggest that the consumer remain in a credit contract without considering whether this would be in the consumer’s best interests. For example, it may be a breach of the duty if the broker suggested the consumer remain in their current home loan when they could refinance to a cheaper product as the broker did not want to incur the consequent liability to the lender when their commission payments were clawed back.

We have provided examples in Regulatory Guide 273 Mortgage brokers: Best interests duty illustrating how we expect brokers to approach some of the issues they may encounter while complying with the conflict priority rule.

Does the conflict priority rule only apply where one lender pays a higher commission?

No. The conflict priority rule is worded broadly. Any interest of the broker (or the other parties set out in the answer below) could trigger the rule if it conflicts with the interests of the consumer. When this happens, the consumer’s interests must be prioritised when the broker provides credit assistance.

How does the conflict priority rule relate to referral arrangements?

The conflict priority rule will apply whenever credit assistance is provided. Referral arrangements which relate to the provision of credit assistance will also be subject to the rule.

The legislation provides that brokers must prioritise the interests of the consumer if the broker knows, or reasonably ought to know that there is a conflict between the consumer’s interests, or their interests, or a related party’s interests. A related party might include:

  • the licensee;
  • an associate of the licensee or credit representative;
  • another representative of the licensee; or
  • an associate of another representative of the licensee.

The term ‘associate’ is then defined in the National Credit Regulations. We consider that when a broker has a referral arrangement with a third party, that third party is likely an ‘associate’ and the conflict priority rule applies. Referrals must not cause a conflict of interest such that the broker is unable to prioritise the consumer’s interests in relation to the credit assistance.

When determining whether a conflict exists, a broker might turn their mind to whether they will receive any benefits as a result of the referral. If the broker cannot prioritise the consumer’s interests when providing credit assistance, the broker must not proceed.

Does the conflict priority rule apply to products or services which are incidental to the credit assistance, such as insurance?

The best interests duty and related obligations apply only in relation to credit products that are regulated under the National Credit Act—that is, products provided to consumers for personal, domestic or household purposes or for the purchase or improvement of residential investment property.   

The duty does not apply to non-credit products, such as insurance products. However, brokers must still act in the best interests of the consumer in relation to the credit products within that transaction. Additionally, they must prioritise the interests of the consumer when providing credit assistance in relation to those products.

Where there are other services or products that the broker provides or recommends, they should consider whether doing so affects the credit assistance they provide. If it does, they will need to ensure that the affected credit assistance would be in the best interests of the consumer, and that the consumers’ interests are prioritised.

It is important that brokers do not imply that the best interests duty applies in situations where they are assisting consumers in relation to non-credit products. Doing so may amount to misleading or deceptive conduct.

This update includes responses to the following questions relating to packages:

  1. Does the best interests duty apply to all products within a package?
  2. What should a broker do in relation to packaged credit cards?
  3. Do brokers need to compare packages to other packages and to standalone home loans?

Packages                                                                   

Does the best interests duty apply to all products within a package?

The legislation is designed so that the best interests duty will apply to all credit assistance provided by brokers, including the recommendation of each credit contract sold together in a package. The Replacement Explanatory Memorandum indicates that if a product is included in a package, it must be in the best interests of the consumer. The Replacement Memorandum at paragraph 3.23 provides:

The obligations apply in relation to credit assistance provided by mortgage brokers in relation to any credit contract. This ensures that when mortgage brokers deal with consumers in relation to mortgages, the broker must act in the best interests of the consumer not only in relation to the mortgage but also in relation to any other credit contracts for which they provide credit assistance. Examples of other credit contracts in relation to which a mortgage broker may provide credit assistance include credit cards and personal loans that are packaged with the mortgage as well as unsecured credit for home renovation.

When determining whether a package is in a consumer’s best interests, the home loan will often be the main consideration, but it is not the only consideration, and other components of the package will also be relevant. The Replacement Explanatory Memorandum at paragraph 3.26 provides:

Often a mortgage is packaged with one or more other credit contracts as a single product offering. In recommending a package the broker would be expected to ensure that it, rather than the standalone mortgage (if available) or an alternative standalone mortgage or packaged product in the range of options considered by the broker, is in the consumer’s best interests. In making this assessment, the broker would be expected to weigh up the relative benefits and risks for the consumer, which may depend on a range of factors including what the consumer is attempting to achieve and the relative value and importance of the different components of the package. In a package consisting of a home loan and a credit card, for example, the home loan will often be the primary credit contract relevant for determining whether the package is in the consumer’s best interests. A broker should be able to articulate why the particular loan or package they recommend is in the consumer’s best interests – including to the consumer.

The recommendation that the consumer enter into each contract in the package is made in the context of the other recommendations and the fact the products are sold together. For example, for a home loan and credit card package, the home loan is likely to be relevant to the broker’s assessment of whether entering into the credit card is in the best interests of the consumer. In some instances, it may be helpful for brokers to base their recommendations on an assessment of the package as a whole. Further guidance on this and other matters is available in Regulatory Guide 273 Mortgage brokers: Best interests duty (RG 273).

What should a broker do in relation to packaged credit cards?

The inclusion of any credit card as part of a package should be in the best interests of the consumer if that package is to be recommended.

Brokers should compare packages with other packages as well as standalone home loans, to determine which product(s) would be in the consumer’s best interests. Additionally, if a consumer has an existing credit card, the broker should:

  • compare the potential packaged credit card(s) with the existing credit card;  and
  • make a holistic assessment of the outcomes that may be achieved if the consumer takes out the home loan packaged with a credit card (i.e. relative to the standalone home loan products that are available).

Brokers should consider the consumer’s past use of similar credit products and their financial situation. Additionally, the broker may also need to consider whether the consumer might close their existing credit card to simplify their arrangements or maintain a certain aggregate credit limit.

Clear records about the recommendations and the reasons for them will help brokers demonstrate that they have complied with the best interests duty in respect of the package of products.

RG 273 provides examples illustrating how we expect brokers to approach some of the issues they may encounter while complying with the best interests duty in relation to packages. Examples 13 to 15 are particularly relevant to packages involving credit cards.

Do brokers need to compare packages to other packages and to standalone home loans?

Recommendations to consumers should identify and consider for each product within the package:

  • how that product within the package will meet the consumer’s needs, objectives, priorities and preferences; and
  •  whether (and why) suggesting the consumer take out that product, as part of a package, would be in the consumer’s best interests.

Forming a view on these matters will require brokers to compare the package to other packages available to the consumer (and available to the broker—see RG 273.112-115 for information on accreditation), and to standalone home loans without other packaged credit products. As noted above, the recommendation that the consumer enter into each contract is made in the context of the other recommendations.

Brokers should keep clear records of their justification for recommending a particular package to the consumer and the comparisons they have made between the package recommended, standalone home loans and other packages available to the broker. Brokers should record the reasons why they consider the products contained within the package are in the consumer’s best interests, and record the steps they have taken to educate the consumer about their obligations and the features of the products within the package.