The federal government is looking at extending the best interest duty to all credit assistance providers, not just mortgage brokers.
The move is aimed to reduce any possible conflicts of interest.
The banking royal commission recommended a BID be applied to mortgage brokers only but the government is now considering extending it.
The proposal being looked at would cover credit licensees and representatives who provide credit assistance to a consumer in relation to a credit contract if they are a mortgage broker or if all of the following three criteria apply:
- they provide credit assistance to credit contracts
- they don’t perform the obligations or exercise the rights of a credit provider
- they provide credit assistance to credit contracts offered by more than one credit provider
Finance brokers who also write mortgages could find themselves covered under this new proposal, but it would not cover credit assistance provided in relation to credit for mainly business purposes.
Seeing as the proposed obligations wouldn’t include those who also perform the rights of a credit provider, it wouldn’t cover bankers.
The new BID comes in for mortgage brokers on January 1, 2021 but this new proposal for credit assistance providers wouldn’t kick in until March 21, 2021.
“To ensure appropriate consumer protections remain in place, the best interests obligations already legislated for mortgage brokers [will be] extended to all credit assistance providers,” a government statement reads.
“A best interests duty and obligation to resolve conflicts of interest in the consumer’s favour will apply to all credit assistance providers.
“The extension of the best interests obligations is intended to improve outcomes for consumers by legally requiring that credit assistance providers act in the consumer’s best interests and place their consumer’s interests before their own.
“The extension of the best interests obligations does not affect the arrangements already legislated for mortgage brokers.
“As a result, all credit assistance providers will need to comply with the obligations in relation to credit contracts.”
