ASIC Will Review Referrer Programs and Lender Oversight of Brokers. The Letter Went to Bank Boards — Your Exposure Is the Conflict Priority Rule

A letter to bank boards that names your channel

On 30 September 2026, ASIC published five sector supervisory letters — banking, superannuation, general insurance, life insurance and markets — under media release 26-232MR. The banking letter is titled ASIC’s 2026–27 banking sector priorities. It is addressed “To: Bank boards and executives” and signed by ASIC Commissioner Kate O’Rourke.

Brokers are not the addressee. But under the heading “Lending practices and broker oversight”, with an expected commencement of Q3 2026–27, the letter says this:

Q3 of the 2026–27 financial year is the January–March 2027 quarter — roughly one quarter away, not a distant consultation.

ASIC is explicit about why it published the letters. They are, in the document’s own words, “our response to industry requests for greater transparency of ASIC’s regulatory priorities and planned activities,” intended “to help banks plan, allocate resources and focus attention on the issues ASIC expects boards and executives to consider and act on in the year ahead.”

Three limbs, and only one is about you

The review has three named components, and they pull in different directions.

1. Short-term variable remuneration for proprietary lenders

ASIC will look at the impact of changes banks made in 2024 to short-term variable remuneration for their own employed lenders. This is a proprietary-channel question. It sits inside the bank, not on your file.

2. The use of referrers by lenders

This is the limb with the widest reach. A referrer who introduces a customer to a lender is generally not a credit licensee and does not hold a best interests duty. The arrangement can nonetheless move significant volume.

3. Lender oversight of brokers

This is the limb brokers will notice, and the one most likely to be misdiagnosed. ASIC is reviewing the lender’s systems — how banks accredit, monitor and supervise the brokers who lodge with them. The entity being examined is the bank. The practical consequence lands on brokers: a lender asked to demonstrate the quality of its broker oversight will most likely do so using broker files, broker accreditation records and broker monitoring data.

Why the referrer limb is the one to read twice

The MFAA’s response, issued the same day, put the referrer question at the centre. Chief executive Anja Pannek said the association had been raising it for some time.

Pannek also welcomed the remuneration limb, on the ground that “incentives influence behaviour, and it is appropriate that ASIC considers whether remuneration structures are creating unintended conduct risks or contributing to poorer consumer outcomes.”

Her substantive point for brokers was about proportionality. Noting that brokers facilitated a record 81.6% of all new residential home loans in the June 2026 quarter, Pannek argued the existing architecture around the channel should be taken into account:

The MFAA is not waiting on the outcome. Its Fraud and Referrer Working Group, which brings together lenders and aggregators, is developing Referrer Risk Management Standards covering due diligence and onboarding, the appropriate role and conduct of referrers, customer contact, ongoing monitoring, red flags, escalation and termination. The association is also pushing for better mechanisms to share intelligence about high-risk intermediaries — addressing what Pannek described as a vulnerability where “a high-risk individual can move elsewhere in the ecosystem without relevant information following them.”

The FBAA struck a similar note. In comments reported by The Adviser on 30 September, chief executive Leo Gagic said that “while we strongly support efforts to identify and remove bad actors from the industry, it is equally important to recognise the vast majority of brokers operate professionally, ethically and in the best interests of their clients.”

Both bodies are making the same argument: examine the whole distribution chain, and don’t mistake the regulated part of it for the weak part.

Where it lands: the conflict priority rule

Most brokers, reading “lender oversight of brokers,” will brace for more lender audits. The sharper exposure for many broker businesses is their own referral and lead-source arrangements — and the rule that governs those is not new, not under review, and already reaches third parties.

The best interests duty sits in sections 158LA and 158LE of the National Consumer Credit Protection Act 2009. Alongside it, sections 158LB and 158LF contain what ASIC’s Regulatory Guide 273 calls the conflict priority rule. RG 273.9 describes it plainly: if there is a conflict of interest when providing credit assistance, “you are required to give priority to the consumer’s interests. You must not prioritise your own interests or the interests of credit providers or third parties.”

Three features of that rule bear directly on referral arrangements.

It is an active obligation, and it names third parties

RG 273.155 quotes paragraph 3.29 of the Replacement Explanatory Memorandum: “The obligation to give priority to the consumer’s interests is not limited to conflicts of interest that mortgage brokers currently know about. Mortgage brokers are expected to take active steps to identify all conflicts of interest covered by section 158LB to minimise the risk of a contravention, including obligations that can arise because of their commercial relationships with third parties.” A referral arrangement is a commercial relationship with a third party.

Disclosure alone does not discharge it

RG 273.158 says you should inform the consumer where ownership structures or other commercial ties have the potential to affect the credit assistance provided — but “you cannot comply with the conflict priority rule merely by disclosing a conflict of interest or having the consumer consent to a conflict.” The guide notes that under section 334, a contractual condition seeking to waive those obligations is void.

Your systems are part of it

RG 273.157 states that systems “should be structured without bias or conflicts,” and that “product recommendation or aggregator software should not have in-built credit provider or product bias.” That is a systems question, not just a file-note question.

And then there is the record. RG 273.165 lists what ASIC generally expects a broker to keep. Sub-paragraph (h) connects directly to everything above: “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.” RG 273.160 adds that where a conflict exists, you should keep records of your reasoning behind any recommendation that would benefit a related party.

What else is in the letter

An AI review, starting earlier. ASIC will commence a banking sector AI review with an expected commencement of Q2 2026–27 — the October–December 2026 quarter, ahead of the lending review. It will focus on new and proposed AI use cases by banks and the impact on customers, and ASIC says it will work with APRA to minimise duplication. The letter points back to Report 798 Beware the gap: Governance arrangements in the face of AI innovation, published in October 2024, which found AI adoption was growing while governance and risk assessment lagged. ASIC states it is “keen to ensure that key consumer protections are maintained throughout its deployment, particularly for customer-facing interactions, decision-making and lending processes.”

Offset accounts remain live. The letter reiterates Report 837 Offsets, out of mind: Banks fall short on mortgage offset account promises, which reviewed the offset practices of eight banks representing more than 70% of Australia’s $2.5 trillion home loan market. ASIC says it “will continue to monitor this issue going forward and take action where appropriate.”

Debt collection findings land in the same quarter. ASIC will complete its review into debt buyers’ and contingent collectors’ conduct — and, notably, “lenders’ oversight” of them — and publish findings in the third quarter of 2026–27.

Hardship. The letter asks banks to review their hardship arrangements against Report 782 Hardship, hard to get help and the follow-up Report 815 Hardship, not as hard to get help, noting consumer groups had raised concerns about slower improvement by some lenders.

Small business lending by non-banks. Also from Q2 2026–27, ASIC will examine lending practices by non-bank lenders that can lead to poor outcomes for small businesses, including the use of unfair contract terms.

Two dates further out. The Scams Prevention Framework is scheduled to commence in March 2027, and a review of buy now pay later providers’ compliance with credit laws is anticipated in early 2027.

The structural read: distribution is the conduct risk

ASIC’s Corporate Plan 2026–27, published on 26 August 2026, makes the framing explicit. Under the heading “Conduct risk”, it says: “Conduct risk across all sectors is increasingly shaped by distribution and servicing choices, rather than product features or firm size.” It then names the channel directly: “Intermediaries such as mortgage brokers and platforms play a growing role in shaping consumer behaviour across both mass-market and complex products.”

That is the throughline. A regulator that has decided conduct risk lives in distribution rather than in product design will keep arriving at the same place: who introduced the customer, what they were paid, and who checked.

What to review this week

A focused pass over your referral and lead-source arrangements is the highest-value use of an hour before the January quarter. Working through it with your licensee or aggregator compliance team is sensible.

1. List every inbound and outbound referral arrangement. Accountants, financial planners, buyer’s agents, conveyancers, builders, real estate offices, comparison and lead-generation platforms, other brokers. Include the informal ones — an arrangement without paperwork is still an arrangement.
2. For each, write down what moves. Money in either direction, reciprocal volume expectations, equity or ownership ties, marketing contributions, shared premises or staff. RG 273.156 suggests considering what benefits you or a related party receive if the consumer acts on your credit assistance.
3. Test whether any arrangement could shape a recommendation. Not whether it has, but whether it could. RG 273.159 gives examples that would not satisfy the conflict priority rule, including recommending loans from a particular credit provider to a substantial proportion of consumers irrespective of their particular needs.
4. Check your disclosure — then check what sits behind it. Disclosure is expected, but RG 273.158 is clear it is not sufficient on its own.
5. Open five recent files where a referral was involved. Can a reader who was not there see the options considered, the recommendation, the reasons, and any conflict identified with the steps taken? That is the RG 273.165 list, and (g) and (h) are where files usually thin out.
6. Look at your software. RG 273.157 puts product recommendation and aggregator software in scope. If a tool’s default ordering or shortlist favours a funder, know that and be able to explain how you work around it.
7. Pressure-test your own referrer onboarding. The MFAA’s forthcoming standards will cover due diligence and onboarding, conduct, customer contact, monitoring, red flags, escalation and termination. Those seven headings are a serviceable self-audit now.
8. Ask your key lenders what is changing. A direct question to your BDM about accreditation, monitoring and file-review expectations for 2027 is likely to get an honest answer — the lender is reading the same letter.

Common questions

Sources: ASIC, ASIC’s 2026–27 banking sector priorities, supervisory letter to bank boards and executives, 30 September 2026, published with media release 26-232MR; ASIC, Corporate Plan 2026–27, 26 August 2026; ASIC Regulatory Guide 273 Mortgage brokers: Best interests duty; MFAA media release, “ASIC steps up scrutiny of fraud referrers and lender incentives”, 30 September 2026; The Adviser, 30 September 2026 (FBAA comments).