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Insights · Regulator

Five years of BID — the changes you actually see at the file level.

The Best Interests Duty came into force in January 2021, and the point of it is simple: a broker is legally bound to recommend the loan that's in your best interest. Walk into a bank directly and that duty doesn't apply — they can sell you their own product whether or not it's the sharpest option for you. That gap is the reform's real consumer protection. Five years on it's mature legislation — embedded into broker workflow, lender systems and consumer expectations — and the operational change shows up in the documentation, the recommendation logic, and what you should now expect from any broker you engage.

Reviewed · Adam King — 30 years in finance, Sunshine Coast

What BID actually requires

The Best Interests Duty — Section 158LA of the National Consumer Credit Protection Act — requires mortgage brokers to act in the best interests of consumers when providing credit assistance. It came out of recommendation 1.2 of the Royal Commission's Final Report and was legislated by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, with effect from 1 January 2021. The duty has two limbs. First, the broker must act in the consumer's best interests. Second, where there's a conflict between the consumer's interests and the broker's interests (or those of a related party), the broker must give priority to the consumer's interests. The second limb is the operative bite — it's where the conflicts-of-interest provisions come in. In practical terms, BID requires the broker to be able to demonstrate, in writing on the file, that the recommended loan was selected in the consumer's best interests after a reasonable consideration of the alternatives. The 'reasonable consideration' is the part that has driven workflow change. Pre-BID, a broker could recommend a loan because it was familiar, fast, or generated a higher trail. Post-BID, every recommendation must be supported by a documented comparison that shows the recommendation is genuinely better for the consumer than the alternatives considered. ASIC's Regulatory Guide 273 sets out the regulator's expectations on what 'reasonable consideration' looks like in practice.

What BID changed in the file room

  • Lenders compared

    3+

    Industry norm post-BID — was often 1 pre-BID

  • Recommendation rationale

    Written

    Now required on file for every recommendation

  • Record retention

    5 yrs

    BID-relevant documentation retained per NCCP

  • Broker channel share

    80%+

    MFAA-reported share of new residential lending in the latest figures — post-BID growth, not decline

What it changed in the recommendation conversation

The first practical change is that the broker now opens the conversation with the consumer's circumstances and objectives, not with a product. Pre-BID, plenty of consumer-broker conversations started with 'I can offer you this product from XYZ Bank, the rate is sharp'. Post-BID, the conversation starts with 'tell me about your position, your income, your plans, what you're trying to achieve'. The product follows the conversation, not the other way around. The second change is in how the comparison is presented. Most BID-compliant brokers now produce a comparison document — typically a Best Interests Recommendation or similar — that lists multiple lender options the broker considered, the reasons each was or wasn't recommended, and the rationale for the final recommendation. The document is in plain English, signed by the broker, and held on file. Consumers receive a copy. The third change is in the conflict declaration. Brokers are required to disclose to the consumer the commission they will earn on the recommended loan, and to declare any other conflicts (referral arrangements, ownership stakes in associated entities, etc.). That commission disclosure is set out in the Credit Quote you're given — the document that states the commission is lender-paid and how it's calculated — provided in writing at the front of the engagement. This was not always universal pre-BID; it is now standard practice.

Before and after BID — at the file level

ElementPre-BID (pre-2021)Post-BID (current)
Lenders comparedOften 1, sometimes 2Typically 3+, documented
Recommendation rationaleVerbal, not documentedWritten, retained 5+ years
Conflicts of interestGeneral disclosure at engagementSpecific disclosure per loan + commission disclosed
Consumer interviewProduct-ledCircumstances-led
Lender choice driverFamiliarity, speed, trailDocumented consumer-best-interests test
Recommendation reviewInternal onlySubject to ASIC audit

File-level comparison of broker practice pre- and post-BID. Indicative — actual practice varied (and varies) by individual broker and brokerage.

Practical implication

Ask for the recommendation rationale in writing. You're entitled to it.

Every BID-compliant broker should be willing — and able — to give you a written summary of why they recommended the lender they did and which alternatives they considered. If they can't, that's a flag. The rationale doesn't need to be long. It needs to be specific and on the file.

What didn't change — and why that matters too

BID didn't change the commission structure. Brokers continue to be paid by lenders, with an upfront commission at settlement and a trail commission across the life of the loan. The Royal Commission considered banning trail commissions; that recommendation was not adopted by Parliament. The trail remained, and so did the upfront. What changed was the obligation to demonstrate that the recommendation was best-interests-aligned despite the broker being paid by the lender. BID didn't change the lender panel a broker can access. Brokers continue to operate with the panel they're aggregated through (the aggregator group). Our panel runs to 60+ lenders. Different brokers within the same aggregator can have access to slightly different panels depending on their accreditations. The duty doesn't require every lender on the panel to be considered for every consumer — it requires reasonable consideration of relevant alternatives. Reasonable doesn't mean exhaustive. BID didn't transform broker market share. The broker channel has grown post-BID, not shrunk. The Mortgage and Finance Association of Australia (MFAA) reports broker market share has climbed to around 80% of new residential mortgage origination. The post-BID environment has, if anything, strengthened the broker channel because the duty creates a structural difference between broker advice (subject to BID) and bank-direct advice (not subject to BID in the same way).

What consumers should expect from a BID-compliant broker

Five practical signs you're working with a broker who's operating to current standards.

  • A first conversation that asks about your circumstances and objectives before any product is mentioned.
  • A written summary, before settlement, of the lenders considered, why each was or wasn't recommended, and why the final recommendation suits your file.
  • A clear written disclosure of the commission the broker will earn on the recommended loan, both upfront and trail.
  • An ongoing review offer — at Exactly Loans we review rates and renegotiate with lenders every six months as standard, and we proactively prompt the conversation. We aim to have your back well past settlement, not just on the day the loan funds.
  • Willingness to recommend a lender outside the broker's preferred relationships if the consumer's interests point that way. This is the BID test in practice.

What ASIC has done since

ASIC has run multiple thematic reviews since BID came into force. Reports in 2021, 2023 and a follow-up in early 2025 looked at how the industry has implemented the duty, with a focus on the quality of recommendation documentation, the depth of comparison, and the handling of conflicts. The findings have generally been constructive: the industry is implementing BID in good faith, documentation has improved materially, and there is a small minority of brokers whose practices still need work. ASIC has issued enforcement outcomes against a handful of brokers who failed to meet the duty, primarily for inadequate documentation rather than wilful misconduct. The more interesting commentary from ASIC has been about the limits of BID. It's a duty about credit assistance, not financial planning. A broker recommending a loan is not — under BID — required to advise on whether the consumer should be borrowing at all, whether their broader financial plan is sound, or whether the deposit structure is optimal. Those are financial-planning conversations that sit outside BID. Good brokers have those conversations anyway. They're not a legal obligation under the duty. The full text of ASIC's RG 273 and the relevant sections of the NCCP Act are at asic.gov.au. The MFAA also publishes broker-facing guidance on implementing BID at mfaa.com.au. Both are worth reading if you want the operational detail behind the consumer-facing explanation.

From the practice

BID didn't make us recommend better loans. It made us document why we did.

The brokers who were already doing the right thing pre-BID kept doing it; we just write it down now. The change BID brought was discipline — a forcing function to articulate the reasoning that good brokers were always doing in their head. That's not nothing. It raises the floor for the industry.

Questions you might have

The honest answers.

Real numbers · honest answers

Working with a broker should *feel* like advice.

Twenty-minute call. No commitment. We'll explain how the recommendation process works, what you'll see in writing, and where you sit relative to your current loan.

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General information only — not personal credit advice. Figures are indicative and subject to confirmation against current lender pricing and policy.