We have already covered what RG 273 and the best interests duty are and how to write the responsible lending side of an NCCP note. This article is narrower. It is about the BID part of the file note itself: what ASIC expects to see written down, how that changes for a refi or a cash-out, where notes usually fall over, and what a good one looks like.
The two provisions your note has to answer
Part 3-5A of the National Consumer Credit Protection Act 2009 (the NCCP Act) puts two obligations on mortgage brokers. They started on 1 January 2021.
- Section 158LA - the best interests duty. A licensee who is a mortgage broker must act in the best interests of the consumer when providing credit assistance in relation to a credit contract. Section 158LE puts the same duty on credit representatives.
- Section 158LB - the conflict priority rule. If the broker knows, or reasonably ought to know, that there is a conflict between the consumer's interests and the interests of the broker, the licensee, or their associates and representatives, the broker must give priority to the consumer's interests. Section 158LF is the credit representative version.
Both are civil penalty provisions. Under s 334, a contract term that tries to waive them is void, and ASIC says plainly at RG 273.158 that you cannot comply with the conflict priority rule just by disclosing a conflict or getting the client to consent to it.
Neither section tells you how to write a file note. The record expectations come from ASIC's Regulatory Guide 273, and they are more specific than most brokers realise.
What ASIC RG 273 expects you to keep
RG 273.21 says ASIC expects evidence of compliance with the best interests obligations to come predominantly from the broker's records. The detail is in RG 273.162 to RG 273.172. ASIC expects records of how you acted when providing credit assistance, including the inquiries you made and "the consideration, investigation and assessment of the products you recommend". RG 273.165 then lists what those records generally include:
- A copy of the responsible lending assessment, or the documents you would use to prepare it if the client asks for it.
- A copy of the credit guide you gave the client.
- The information provided to the credit provider as part of the application.
- Outcomes of credit applications.
- Relevant conversations with the consumer.
- Information showing you acted in the consumer's best interests, including records of efforts made to educate the consumer.
- The options and the ultimate recommendation you gave and the reasons why, including a detailed description of your decision-making process.
- Any potential conflict of interest you identified, and the actions you took to prioritise the consumer over yourself or a related party.
RG 273.167 confirms that file notes, including records of conversations, are one of the accepted forms of record, alongside comparison tool outputs, fact finds, correspondence and working papers.
Two more paragraphs matter for how you work day to day. RG 273.169 says taking notes throughout the process, contemporaneously, may help you accurately capture your reasoning at each point in time, and that drafting notes only at the end may not be as effective. RG 273.170 suggests a concise narrative summary that connects your records and explains why particular products were recommended, what the client decided, and the steps you took. ASIC says that summary should be evidence based and supported by contemporaneous records.
The four things the note must show
1. The client's priorities, in their words
RG 273.91 says every recommendation must be based on the consumer's individual circumstances. A reviewer tests that by reading the client's priorities first and the recommendation second. If the priorities are generic, nothing else in the note can be tested against them.
Write what the client said and how they ranked it. "Wants lowest repayments for the next 2 yrs while on one income, offset important, not fussed about staying with current bank" is useful. "Wants a competitive rate" describes every client you have ever had. Where the client gave a reason, keep the reason, because the reason is what justifies a feature that costs more.
2. The options you considered
RG 273.92 says it is generally helpful to present a shortlist with one option recommended. RG 273.93 says the client should understand why those options were selected, why others were not presented, and why one was recommended. RG 273.95 adds that if every option is from the same credit provider, you should explain that and give reasons.
So the note names the shortlist, says in a line why each product made it, and says which product types you set aside and why. Attach or reference the comparison output from your aggregator software. The note explains the thinking. The comparison report carries the numbers.
3. The cost comparison
ASIC treats cost as a priority factor. RG 273.54 says a failure to consider cost and investigate the lowest cost options may suggest non-compliance, and that any recommendation of a higher cost loan needs to be supported by evidence of why it is in the client's best interests. RG 273.56 points out that the lowest rate is not always the lowest cost once fees, offset and redraw are counted.
Your note should record the rate, the fees, and the overall cost position of each shortlisted option, then say where the recommended loan sits. If it is not the cheapest, the note needs the specific non-cost reason tied back to something the client said they needed (RG 273.57).
4. Why this product, and how conflicts were handled
RG 273.90 says the recommendation should clearly articulate how it achieves the client's objectives and is in their best interests relative to the other options. That sentence is the core of a BID note. It links one named priority to one named product feature or cost outcome.
On conflicts, RG 273.160 says that where there is a conflict you should keep records of your reasoning behind any recommendation that would benefit a related party. If the lender is a related party, a white label product of your aggregator, or pays differently, write that down along with why the recommendation still puts the client first. If there is no conflict, a single line saying you checked and found none is enough.
Refinance and cash-out scenarios
Refinances get more attention in RG 273 than any other scenario, because a refi always pays the broker and does not always help the client.
Refinance
- Record the cost of switching. RG 273.58 says the expenses of refinancing may exceed the cost savings of a new loan, and in that situation recommending a new loan may not be in the client's best interests. RG 273.120 says you should consider the costs associated with refinancing. Note discharge fees, break costs on any fixed portion, application and settlement fees, government fees and any LMI.
- Record the break-even. RG 273.58 says the client may benefit from an explanation of when the savings would exceed the refinancing expenses. Put the number of months in the note.
- Record the stay-put option. RG 273.119 says you must not suggest a client remain in their current loan without considering whether that is in their best interests. ASIC quotes the Explanatory Memorandum example of a broker who avoids a refi to dodge a commission clawback. If you asked the current lender to reprice, note the result. If staying was the best outcome, say so and record why (RG 273 Example 10).
Cash-out and debt consolidation
RG 273 does not have a separate section on cash-out. The general principles still bite harder here, for two reasons. A larger loan usually means a larger commission, which is exactly the kind of interest RG 273.156 asks you to think about when working out whether a conflict exists. And rolling short-term debt into a 30 year home loan can lower the monthly repayment while raising the total interest paid. For a cash-out or consolidation, the note should show:
- The purpose of the extra funds in the client's words, and how the amount was arrived at. A builder's quote or a payout figure is better than a round number.
- That the amount is what the client needs for that purpose, and who suggested the figure.
- For consolidation, that you explained the total cost over the longer term as well as the lower repayment, and what the client plans to do about it, such as keeping repayments at the old level.
- Any alternatives discussed, such as a smaller top-up with the current lender or leaving a low-rate car loan where it is.
- That you explained it in a way the client understood. RG 273.165(f) specifically lists records of efforts made to educate the consumer.
Common file-note failures
- The recommendation with no reasoning. "Recommended Lender A 2 yr fixed" and nothing after it. The note records a decision and none of the thinking RG 273.165(g) asks for.
- Priorities copied from a dropdown. The fact find says "competitive rate, flexibility". Every file in the business says the same thing, so none of them show the recommendation was based on this client.
- Higher-cost loan, no explanation. The comparison report on file shows a cheaper option and the note is silent. RG 273.54 says this is where ASIC expects evidence.
- Refi with no switching costs. Savings are quoted per month, and break costs, fees and the break-even point do not appear anywhere.
- Same lender every time. RG 273.159 lists recommending one credit provider to a substantial proportion of clients, irrespective of their needs, as a scenario that would not satisfy the conflict priority rule. Individual notes that explain the choice are your only answer to that pattern.
- Client chose against advice, not recorded. RG 273.104 says you should clearly record the recommendations you presented, including alternatives the client did not select, and the steps you took to educate them.
- Written at settlement, from memory. RG 273.169 is direct that end-of-process notes may not be as effective as contemporaneous ones. A note dated six weeks after the conversation it describes also reads poorly in any dispute.
- The note says it is on file, and it is not. The note refers to a product comparison or a repricing email that nobody saved.
BID file note checklist
| What the note shows | What good looks like | Source |
|---|---|---|
| Client priorities | Specific, ranked, in the client's words, with the reason behind each | RG 273.91 |
| Shortlist presented | Named products, why each was selected, one recommended | RG 273.92-93 |
| Options set aside | Product types or features ruled out and why, especially any that could have suited | RG 273.171-172 |
| Cost comparison | Rate, fees and overall cost of each option. Evidence if the pick is not the cheapest | RG 273.54-57 |
| Why this product | One or two sentences linking the client's top priorities to this loan, relative to the others | RG 273.90, 273.165(g) |
| Refi costs and break-even | Discharge, break, application and government fees, LMI, months to break even, stay-put option considered | RG 273.58, 273.119-120 |
| Conflicts | Any related party, ownership or remuneration interest, and how the client was put first. Or a line that none was identified | s 158LB, RG 273.160, 273.165(h) |
| Client education | What you explained (offset, fixed break costs, IO reverting to P&I) and that the client understood | RG 273.165(f) |
| Client decision | What they chose. If against your recommendation, what you presented and the risks you set out | RG 273.104 |
| Timing | Written at or near each conversation, dated, and not quietly editable later | RG 273.169 |
If you want to run a note against these points interactively, use our free best interests duty file note checklist. For the responsible lending items that sit beside it, there is the NCCP file note compliance checklist.
Worked example
The client, lenders and figures below are invented for illustration. The note is short on purpose. It is a summary that points to the documents on file.
- Their current loan
Lender A, $612,000 on a variable rate, principal and interest, no offset account, 27 years left. Estimated value is $940,000. That gives a loan-to-value ratio (LVR) of about 69% after the cash out, so no lenders mortgage insurance (LMI). Both are salaried employees.
- What they want, in Priya's words
- 1. A lower rate. "Get the rate down, we have not been repriced in 3 years."
- 2. $35,000 for a bathroom renovation. We sighted the builder's quote of $33,800. The extra covers a 5% buffer.
- 3. An offset account. They hold about $40,000 in savings and want it working against the loan.
- 4. No fixed rate. "No fixed, we might sell in 2 to 3 years."
- What we checked
Asked Lender A to reprice on 12 August. They offered 0.20% off, but that product still has no offset account.
- Options presented
- Lender B: basic variable loan. Lowest rate, but no offset account.
- Lender C: variable loan with an offset account. Rate is 0.08% higher than Lender B, plus a $395 annual fee.
- Stay with Lender A: keep the loan and top it up at the repriced rate.
- Fixed rates: set aside because they might sell.
- Costs
- With $40,000 in the offset account, Lender C works out cheaper overall than Lender B. The calculation is saved to the file.
- Switching costs about $1,150 in discharge, settlement and government fees. Compared with staying on Lender A's repriced rate, that is recovered in about 5 months.
- Recommendation and why
Lender C, variable rate with an offset account, principal and interest over 30 years. It meets their priorities on rate, offset and no fixed rate, and has the lowest overall cost once their savings are in the offset account. Explained that a 30-year term resets the clock. Priya will keep repayments at the current level, as the new minimum repayment is lower.
- Conflicts of interest
None identified. Lender C is not a related party. Standard panel commission.
- Client's decision
Priya told us to go ahead with Lender C.
- Next steps
- Us: send the credit proposal disclosure and the preliminary assessment to Priya today.
- Dev: send 2 payslips and the Lender A statements by Friday.
Read it as a reviewer would. The priorities are specific and ranked. Three options appear, including staying put. The higher headline rate is explained by a calculation that is on file. Switching costs and break-even are there. A product type was set aside for a reason the client gave. The conflict check is one line. It takes under a minute to read, and every part of the recommendation can be tested against something the client said.
Getting this written on the day
Most brokers know what belongs in the note. The trouble is time. The client's own words and the reasoning are clearest straight after the call, and that is usually when the next client is waiting.
CallNote is Australian software that turns a call or meeting transcript you already have into a structured file note in about two minutes. It never records calls, never joins a meeting as a bot and never stores call audio. You paste the transcript, upload a .vtt or .txt export from Teams, Zoom or Meet, forward it by email, or have it arrive automatically from Dialpad or Aircall. For a face-to-face meeting you can dictate a voice memo afterwards.
There is a system template for NCCP and mortgage notes. You can also paste one of your own past notes and CallNote builds a template that matches your headings and shorthand. You review the draft, fix anything that is wrong, then publish it. A published note is sealed with a SHA-256 checksum, amendments are append-only, and there is a full audit log and PDF export. There is no native integration with Mercury, Salestrekker or other broker CRMs, so the honest route there is copy and paste or the PDF. CallNote drafts the record. Whether you met the duty is still your call and your licensee's.
More for brokers: CallNote for mortgage brokers and our comparison of file note software for brokers.
Common questions
What must a mortgage broker's file note show for the best interests duty?
It should show the client's priorities in their own words, the options the broker considered and presented, the cost of each, why the recommended product was in that client's best interests relative to the others, and how any conflict of interest was handled. ASIC lists these records at RG 273.165, including "a detailed description of your decision-making process". The duty itself is in s 158LA of the National Consumer Credit Protection Act 2009.
Does the NCCP Act say brokers must keep a best interests duty file note?
Sections 158LA and 158LB do not prescribe a form of record. The expectation comes from ASIC's RG 273, which says evidence of compliance will come predominantly from the broker's records (RG 273.21) and sets out what those records generally include (RG 273.162 to RG 273.172). File notes and records of conversations are named as an accepted form of record at RG 273.167.
Do I have to explain why I did not recommend every other loan?
No. RG 273.171 says it is unlikely you will need to give reasons for not considering or recommending every alternative product on the market. Distinguishing the type of product or feature is likely to be sufficient. Where a product type could have been in the client's best interests, RG 273.172 says recording why you did not recommend it will help you demonstrate compliance.
What should a refinance file note include for BID?
The client's reason for refinancing, the costs of switching (discharge, break costs, application and government fees, any LMI), the saving, and when the saving overtakes the costs. RG 273.58 says refinancing expenses may exceed the savings, in which case a new loan may not be in the client's best interests. Also record that you considered the client staying with their current lender, including any repricing request.
Can I recommend a loan that is not the cheapest?
Yes, if you can show why. RG 273.57 says cost is not the only relevant matter and some clients' circumstances mean particular features outweigh cost. RG 273.54 says any recommendation of a higher cost loan needs to be supported by evidence of why it is in the consumer's best interests. Tie the reason to a priority the client gave you and put the comparison on file.
When should the best interests duty note be written?
As you go. RG 273.169 says taking notes and keeping records throughout the process, contemporaneously, may help you accurately capture your thinking at each point, and that drafting notes only at the end may not be as effective. A note written the same day as the conversation is also far more persuasive in an aggregator review or an AFCA complaint than one reconstructed at settlement.