WHAT IS BEST INTERESTS DUTY (BID)
ASIC Regulatory Guide 273 Mortgage brokers: Best Interests Duty v into effect on
1st January
2021. The obligations for a Mortgage broker under BID are that
• the Mortgage Broker must act in the best interests of the Client's; and
the Mortgage broker must prioritise the Client's’ interests when providing credit assistance
(conflict priority rule).
Complying with the Best Interest Duty
BID obligations apply to credit products provided to Client's for personal, domestic, or household purposes or for the purchase or improvement of residential investment property. BID introduces requirements and steps that are additional to the Responsible Lending Obligations and Brokers are required to comply with both Client's. Recommended Steps and Process
Recommended Steps and Process
STEP | PROCESS |
Gathering Information about the Client/s | This step may involve obtaining information about the Client/s.
- What they are trying to achieve - What is their short, medium, and long term goals - Understanding their circumstances and financial situation (assets, liabilities, incomes, and expenses) - What loan features are important to them and what priority they place on those features - Making notes to demonstrate that you understand their needs and objectives - Make reasonable inquiries about the customers financial situation; and - Take reasonable steps to verify the customers financial situation (this step may involve additional verification activity above what the lender has requested). Reasonable steps are to be applied based on the clients understanding of the product and / or the commitment required to the repayments, and it would be based on how well you know your customer, including if you are comfortable with the information presented by them - Ensure that based on the information you have gathered enables you to understand that the client has the capacity to meet their financial obligations (without experiencing financial hardship).
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Making an Individual Assessment | This step may involve considering a range of relevant Lenders and Products.
- Which Lenders meet their requirements (branch lenders, online lenders, ATMs, online banking, and other services as required) - Which Products meet their requirements, have the feature that they value - Always acting in the Clients best interests |
Presenting Information and Recommendations
| This step may involve making recommendations that reflect the range of options that align with the Clients requirements.
- Presenting a min of three (3) Lender/Product recommendations which will meet the client’s requirements and that are in the best interest of the client - Educating the client on the recommended products and any associated products within a Package to ensure all products meet the client’s requirements - Informing the clients of any special offers or rebates available - Engaging and communicating with the Clients and assisting them apply for the credit product that they have selected |
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Creating the SOCA Document for a BID Application
Select Best Interest Duty Application.
From within the SOCA, you need to select the most appropriate loan objective, and complete the SOCA as normal.
| For mortgage finance loans, select from the Mortgage Finance options |
| For other consumer loans, select from the Consumer Finance options |
Creating a Commercial or Non-BID Application
If you have established that the application is for a commercial or non-BID application, select either Mortgage application or Consumer application from the Commercial or Non- BID Application option.
During the Non-BID application process you will be required to complete the Non-BID NCCP compliance as required. For Commercial loans, NCCP is not required.
If you need assistance with determining a BID application, please seek guidance from the Oxcel Compliance Team.
Disclaimer: This information is current as at the time of each QRG publication. It is a general information guide only.