Annie Kane| The Adviser| 28 November 2019
The updated best interests duty bill for mortgage brokers has been tabled in Parliament, outlining the role brokers need to take when helping a borrower from 1 July 2020.
The amended best interests duty – falling under theFinancial Sector Reform (Hayne Royal Commission Response–Protecting Consumers (2019 Measures)) Bill 2019 – has been tabled in Parliament.
In August, the Morrison government introduced the first draft of the duty in the National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 – as recommended by commissioner Kenneth Hayne in the final report of the banking royal commission.
The second version has now been tabled in Parliament. The key features of the new law are:
- mortgage brokers must act in the best interests of consumers in relation to credit assistance in relation to credit contracts (including credit assistance for credit cards and personal loans, such as those that are packaged with the mortgage as well as unsecured credit for home renovation);
- where there is a conflict of interest, mortgage brokers must give priority to consumers in providing credit assistance in relation to credit contracts;
- mortgage brokers and mortgage intermediaries must not accept conflicted remuneration [that which “could reasonably be expected to influence the credit assistance provided” or “could be reasonably expected to influence whether or how the licensee or representative acts as an intermediary”];
- employers, credit providers and mortgage intermediaries must not give conflicted remuneration to mortgage brokers or mortgage intermediaries; and
- the circumstances in which these bans on conflicted remuneration apply are to be set out in the regulations.
Notably, the duty to act in the best interests of the consumer in relation to credit assistance is a principles-based standard of conduct that applies across a range of activities that licensees and representatives engage in.
As such, what conduct satisfies the duty will depend on the individual circumstances in which credit assistance is provided to a consumer in relation to a credit contract.
The duty does not prescribe conduct that will be taken to satisfy the duty in specific circumstances. Instead, it is the responsibility of mortgage brokers to ensure that their conduct meets the standard of “acting in the best interests of consumers” in the relevant circumstances.