What is best interests duty (BID)?
Best interests duty (BID) is a mandatory legal obligation under the National Consumer Credit Protection Act requiring Australian mortgage brokers to act in the client's best interests when providing credit assistance.
Under the National Consumer the team the team (NCCP) Act, Australian mortgage brokers must comply with best interests duty, a strict legal obligation to put the client's interests ahead of their own when recommending loans or credit products. This duty applies throughout the broking process, from initial advice through settlement.
Best interests duty requires brokers to:
- assess the client's objectives, financial situation, and needs before recommending a loan product
- investigate available options across their panel of lenders or access to the broader market
- document the reasoning behind their recommendation
- avoid conflicts of interest, or disclose them clearly when they cannot be avoided
- prioritize loan features and terms that genuinely suit the client, not just the broker's commission
The duty matters because it fundamentally shifts accountability. Brokers cannot simply recommend the highest-commission loan or push unsuitable products. If a recommendation later causes financial harm, brokers can be held liable for breach of BID. This reform, introduced from 1 January 2021 onwards, gives Sydney clients a stronger legal foundation to challenge poor advice or mismatched loans.
For anyone seeking a mortgage, understanding that BID exists means brokers must demonstrate they have considered your situation carefully. When engaging a mortgage broker, you can ask for their reasoning and documentation of how your loan matches your stated needs and circumstances.