Best Interest Duty Record Keeping

Best interest duty (BID) reforms, which comes into effect on 1 January 2021 will require mortgage brokers to improve on how they gather and document information when providing credit assistance.

ASIC has made it clear that a large part of adhering with BID is in keeping detailed note records.

Record Keeping

As a mortgage broker,  you are required to keep records of how you have acted when providing credit assistance. This includes records of inquiries you make into the consumer’s circumstances, and the consideration, investigation and assessment of the products you recommend. ASIC expects that these records will clearly show how you have complied with the best interests obligations.

Good records will help you to demonstrate that you have complied with these obligations. You may also be subject to legal requirements to keep information relating to other obligations. Keeping good records may help you to demonstrate that you have met more than one set of obligations.

Generally, brokers should keep records that include:

  • a copy of the responsible lending assessment which may be provided to the consumer, or the documents and information that would be used to prepare the assessment if it is requested;
  • a copy of the credit guide which was provided to the consumer;
  • information provided to the credit provider as part of the application process;
  • outcomes of credit applications;
  • relevant conversations with the consumer;
  • information showing that you acted in the best interests of the consumer (including records of efforts made to educate the consumer);
  • the options and ultimate recommendation you gave and the reasons why (including a detailed description of your decision-making process); and
  • any potential conflict of interest which you have identified, and the actions you have taken to prioritise the interests of the consumer over your own or those of a related party.

The types of record you keep will vary depending on the recommendations and assistance you provided to the consumer, including their scope.  Records may take various forms, and do not have to be paper based. For example, they may include:

  • documents used to make product recommendations;
  • file notes, including records of conversations;
  • correspondence;
  • working papers;
  • outputs of product and feature comparison tools, including graphical presentations and calculators;
  • fact-finding documents used when making inquiries into the consumer’s circumstances;
  • audio recordings; and
  • evidence of the compliance systems you used (including any compliance systems put in place by the credit licensee), such as—
  • training materials;
  • records of who is attending the training; and
  • call scripts; and
  • evidence of how you have complied with these systems.

How long these records should be kept may vary depending on factors such as the loan term, the interest-only period and whether the consumer refinances. You should use your judgement to consider the nature of the credit product and determine whether documents should be kept for a longer period. Keeping records for a short period of time will place you at risk of being unable to demonstrate how you have complied with your obligation

How to take BID compliant notes?

The be compliant your notes must tell the story of your process.  Should there be a compliant made an independent third party will review your notes to understand the process you followed when providing credit assistance to the client.  These third parties include ASIC, AFCA or even a court.

Best practice notes are;

  • the story of events in the form of a summary or the exact timeline
  • the record of what was agreed and justification
  • the facts and where possible use the client’s exact words

Be aware that having zero notes on file will leave your business open to scrutiny from regulators.  It is crucial that if you have had a face-to-face or phone discussion with the client you confirm the discussion points and their decision via email or you enter notes of your interaction into your mortgage software to hold a written record of events.

Mortgage software for compliant record keeping

The use of technology is helpful in demonstrating and keeping your credit assistance records. Thankfully when you become a mortgage broker with Redrock you will have access to the custom built mortgage broker software that encompasses built in BID record keeping and note taking requirements. Making it easier for you to not only record your documents, files and notes when providing credit assistance, but also serves as your secure digital cloud storage for all your document and data retention, under the one centralised system.