The FBAA Told Lenders to Keep Cashbacks Open to Every Channel. ASIC’s REP 840 Is Why a Direct-Only Offer Becomes Your Evidence Problem

Two things happened in the same week of October. On 13 October ASIC published its first industry-level review of the mortgage broker best interests duty, and told licensees to look closely at recommendations made where a cheaper loan was available. On 16 October the FBAA publicly asked lenders to stop putting promotional offers in one distribution channel and not another. Read separately, one is a compliance story and the other is a channel-politics story. Read together, they describe a single problem that shows up on a broker’s own file.

1. What the FBAA actually asked for

According to Australian Broker, which reported the statement on 16 October 2026, the Finance Brokers Association of Australia warned that lenders offering cashback through selected channels risk damaging broker relationships, with the warning coming as incentives return to a market of weaker loan applications.

FBAA chief executive Leo Gagic framed it as a structural question rather than an objection to incentives. He said short-term promotions could lift a lender’s volumes, but that lenders should weigh that against treating distribution networks consistently: “Short-term market share gains should not come at the expense of long-term channel relationships.” On the incentives themselves he was explicit — “The issue is not the incentive itself” — with the association’s position being that cashbacks and similar offers are unobjectionable where they meet legal and regulatory requirements.

The problem, as the FBAA puts it, arises where an incentive is available through some channels but not others, or where one channel receives a materially different offer. Its asks, as reported, are that incentives be open to borrowers however they apply, that they be transparent and accessible across broker and direct channels, that lenders avoid channel-exclusive offers or materially different terms by channel, and that growth targets be balanced against fairness across distribution networks.

2. Why incentives came back now

The timing is not subtle. Equifax’s Consumer Market Pulse figures, as reported by Australian Broker on 14 October 2026, put mortgage demand down 19.2% year on year in September 2026 — the sixth consecutive monthly decline and the weakest reading since October 2022, after a 14.1% fall in August. First home buyer applications fell 22.1% year on year, the largest annual decline since December 2022. Refinancing told the same story: switching to a different lender fell 8.8%, and refinancing with an existing lender fell 28%.

Equifax chief solution officer Kevin James attributed the pullback to a sustained high-rate environment in which “Australian households are taking a decisive step back”, with strict serviceability assessments “effectively locking them into their current arrangements”.

When the pool of applications shrinks, lenders who still have volume targets have to take share from each other rather than from growth. A promotional cashback is one of the few levers that moves a borrower who is otherwise sitting still. That is the commercial logic the FBAA is responding to, and it is why the association’s point is about structure: the incentive is coming back regardless, so the question is whether it arrives in every channel at once.

It is already back in market in some form. Canstar’s home loan offers comparison page, as at 17 October 2026, listed cashback offers from a range of smaller banks and mutuals — modelled on a $500,000 owner-occupied variable loan against a $1.0 million NSW property — including IMB at up to $4,000 for loans of $750,000 or more, BankVic at up to $4,000, and Greater Bank, Great Southern Bank, Newcastle Permanent, Border Bank, Police Bank and ME each at up to $3,000, with Bank of China at up to $2,888 and BOQ at $2,000. Of those, Canstar’s editorial note records only one channel condition: the Greater Bank offer states that applications must be submitted online. These are amounts and conditions as a comparison site presented them on a single day, not a panel-wide picture, and eligibility and channel rules should be confirmed with the lender before they go anywhere near a client conversation.

3. The part that lands on your file

Here is where the two October stories collide, and it is the part the fairness debate tends to skip.

ASIC released REP 840, Mortgage brokers: Review of best interests duty and complaints handling practices, on 13 October 2026, alongside media release 26-240MR. The review covered 13 credit licensees making up eight large mortgage broker groups — aggregator groups responsible for roughly two-thirds of mortgage broker representatives in Australia — using data from 1 April 2023 to 31 March 2025.

ASIC’s finding on cost is the one that matters here. Seven of the eight aggregator groups reported that their brokers did not recommend the cheapest loan option in more than 20% of cases, and ASIC found instances where brokers did not have clear evidence to support recommending a higher-cost loan — while acknowledging there may be valid reasons, such as greater benefits from particular loan features. ASIC Commissioner Alan Kirkland said licensees “should closely monitor recommendations made by brokers operating under their licence”, “particularly where a lower-cost loan is available”, and that where a broker recommends a loan costing more than the available alternatives, “consumers should be able to clearly understand why that recommendation delivers greater value”.

The MFAA’s own summary of REP 840, published on 13 October 2026, adds useful proportion: ASIC examined 1,600 loan recommendations — 800 where the recommended loan was not the cheapest shortlisted option and 800 where only one option was presented — and the MFAA stresses these were targeted samples, not a representative cross-section, and should not be read as a measure of how common BID breaches are. The MFAA also notes ASIC saw no apparent steering toward lenders paying higher commissions, a finding Gagic, quoted by Australian Broker on 13 October 2026, described as “a positive finding for our profession and deserves recognition”.

That is the asymmetry. The lender decides which channel an offer sits in, and that is a commercial design decision. The broker carries the obligation to act in the client’s best interests, the record-keeping that proves it, and the licensee supervision that now gets measured against an ASIC baseline. The channel call does not have to be explained on anyone’s file. Your recommendation does.

4. What RG 273 says — and what it does not

It is worth being precise, because this is where broker anxiety tends to outrun the actual guidance.

ASIC’s RG 273, Mortgage brokers: Best interests duty, treats cost as a priority consideration. RG 273.51 says the cost of a credit product “can significantly affect the outcome the consumer achieves”. RG 273.54 indicates that “a failure to consider cost and investigate the lowest cost options available” may suggest non-compliance, and that any situation where a higher cost loan is recommended will need to be supported. RG 273.89 says that “as a matter of good practice, you should present a consumer with more than one option”. On records, RG 273.162 expects brokers to “keep records of how you have acted when providing credit assistance”, and RG 273.163 states: “We expect that these records will clearly show how you have complied with the best interests obligations.”

What those paragraphs address is the options you can actually provide credit assistance for. They do not themselves resolve how a broker should treat a promotional offer that exists only in a channel the broker cannot access — a question that sits with your licensee’s policy rather than with any confident reading of a paragraph. ASIC itself frames REP 840 as clarifying how existing obligations should be applied, documented, supervised and monitored, not as creating a new duty.

Which means the practical answer is a process answer, not a legal one: decide, with your licensee, how a client-raised direct-channel offer gets recorded, and apply it consistently. The MFAA’s suggested test for any recommendation is a good one to borrow here — “could your client, and someone reviewing the file later, clearly understand why this recommendation was right for them?” A file that shows the client mentioned a direct-only cashback, that you checked whether it was available through your channel, and that you explained your recommendation against the options you could place, answers that test. A file that is simply silent on a number the client was talking about does not.

This is general information, not legal or compliance advice. Confirm the position with your licensee or aggregator compliance team, and read REP 840 and RG 273 against your own policies before changing anything.

5. The clawback that charges you twice

There is a second commercial edge to this that brokers who lived through the previous cashback cycle will recognise.

The MFAA’s State of Mortgage & Finance Broking Report 2026 put the median clawback per broker at $11,442 in 2025, up 16.5%. In reporting the FBAA’s cashback warning, Australian Broker noted that MFAA chief executive Anja Pannek has linked past spikes in clawbacks to heavy refinancing periods, including the earlier cashback wars.

The mechanism is straightforward. Incentive-led refinancing pulls loans off books early. Loans that come off early inside a clawback window take upfront commission back out of the brokerage that wrote them. In an incentive cycle a broker can lose the deal to a channel-exclusive offer and separately lose commission on a settled loan that an incentive elsewhere has pulled away. Neither of those losses is visible in a pipeline report until the clawback lands.

That is a cash-flow planning point, not just a grievance. If incentives are returning while volumes are falling, the sensible assumption for a brokerage’s next two quarters is that the clawback line goes up, not sideways.

6. The channel-eligibility check most files skip

Most brokerages have a process for confirming product eligibility: LVR, security type, income treatment, postcode. Far fewer have a process for confirming channel eligibility on a promotional offer — whether the cashback, discount or package benefit the client is reading about on a comparison site can be submitted through the broker channel at all, and on the same terms.

That gap costs twice. It costs the appointment, because a broker who cannot answer “can you get me that $3,000?” looks less informed than the website. And it costs the file, because the answer never gets recorded, so the reason the recommendation went where it went is reconstructed from memory months later if a complaint arrives.

7. What to review this week

Pull five recent files where the recommended loan was not the cheapest option you shortlisted. For each one, read only what is written — not what you remember — and ask whether a reviewer with no knowledge of the client could see why that loan suited them. Then check whether any of those five involved a client mentioning an offer they had found themselves, and whether that appears anywhere in the file.

If the answer to the second question is no across all five, that is the process gap to close this month, and it is a cheap one to close. It is a field, a habit, and a licensee position in writing.

8. What to watch next

Two things are moving behind this story.

The first is ASIC’s own supervisory agenda. As Broker Daily reported on 1 October 2026, ASIC has flagged a review of lender conduct in its 2026–27 banking sector supervisory agenda, expected to begin in the third quarter of FY2026–27, covering lenders’ use of referrers and controls over third-party introducer arrangements, how lenders oversee brokers, and the effect of 2024 changes to short-term variable pay for proprietary lenders on lending practices and customer outcomes. That is the first regulatory work in some time that looks at the lender side of the channel relationship rather than the broker side.

The second is Treasury’s unfair trading practices protections for small business and franchisees, which The Adviser reported in July 2026 are due to commence on 1 July 2027, and to which the FBAA made a submission on lender conduct toward brokers. Whether channel-exclusive incentives fall within that regime is not settled, and brokers should not assume they will. But it is the live legislative vehicle, and it is part of why the association’s language this month is about structure and fairness rather than about any single offer.

The strategic read

Brokers arrange more than 80% of home loans, on ASIC’s own description in release 26-240MR, and the MFAA puts broker share at a record 81.6% of new residential home loans off 838,815 loans worth $495.55 billion in 2025. That share is why the FBAA’s argument has weight: a lender that routes an offer away from the channel writing four in five loans is making a choice about the majority of the market.

But share is not the same as leverage on an individual file, and this is the uncomfortable part. On any given deal the broker cannot change which channel an offer sits in, cannot match it, and cannot make it disappear from the client’s screen. What the broker can change is whether the file explains the recommendation well enough to stand up on its own — which is precisely what ASIC has just told eight aggregator groups to supervise more closely.

Treat the channel question as advocacy, and the documentation question as this week’s work. Only one of them is yours to fix.

Sources used for this article: ASIC media release 26-240MR, “ASIC review finds room for improvement in mortgage brokers’ best interests duty practices”, and REP 840, Mortgage brokers: Review of best interests duty and complaints handling practices, 13 October 2026; ASIC RG 273, Mortgage brokers: Best interests duty (RG 273.51, 273.54, 273.89, 273.162–163); MFAA, “ASIC Report 840: What the review means for mortgage brokers”, 13 October 2026; MFAA State of Mortgage & Finance Broking Report 2026; Australian Broker, “Broker body warns lenders against channel-exclusive cashback deals”, 16 October 2026; Australian Broker, “Mortgage demand falls 19.2% as first-home buyers pull back”, 14 October 2026 (Equifax Consumer Market Pulse); Australian Broker, “ASIC puts brokers’ higher-cost loan picks under scrutiny”, 13 October 2026; Broker Daily, “Brokers call for ‘level playing field’ as ASIC probes lender oversight”, 1 October 2026; The Adviser, “Clawbacks under fire as FBAA slams lender tactics”, 16 July 2026; Canstar home loan offers comparison page, as at 17 October 2026.