ASIC Report 840: The Loan File Your AI Can't Justify

ASIC found an evidence problem, not a pricing one

In seven of the eight largest mortgage broker groups in Australia, brokers recommended a loan that wasn't the cheapest on the table more than 20% of the time — and in some cases couldn't show clear evidence of why. That's the finding of ASIC's Report 840, published on 13 October 2026, the regulator's first formal review of the best-interests duty since it took effect in 2021. The report doesn't mention artificial intelligence once. That's exactly why every broker who has wired AI into their file notes should read it.

Read the finding carefully, because the industry reaction got it wrong. ASIC is not saying you must recommend the cheapest loan — it said plainly that a dearer loan can be the right one. The problem it found was the paper trail. In Commissioner Alan Kirkland's words: "Where a broker recommends a loan that costs more than the available alternatives, consumers should be able to clearly understand why that recommendation delivers greater value for their circumstances." ASIC saw cases where that "why" simply wasn't on the file.

What the review actually covered

ASIC reviewed 13 credit licensees making up eight large aggregator groups — together responsible for roughly two-thirds of all mortgage broker representatives — and analysed loan data from April 2023 to March 2025. The headline reassurances are real: the licensees generally had processes designed to support compliance with the duty, and ASIC found no sign of brokers steering clients toward lenders paying higher commissions. The report doesn't create a new duty.

But it named four areas to tighten, and three of them are documentation and oversight: the reasons recorded for recommendations, licensee supervision, complaints handling, and the use of data to identify conduct risk. The through-line is accountability you can show on paper. A recommendation that made sense in the room but left no trace of its reasoning is, to a regulator reading the file two years later, a recommendation with no reasoning at all.

Why this lands hardest on Australian brokers using AI

Here's the collision. Broking has never been busier — brokers now arrange a record 81.6% of all new home loans, per the MFAA's 2025–26 Annual Report released on 22 October. To keep up, brokers are handing the paperwork to AI faster than any other part of the job: fact-finds, document collection, lender policy research, and increasingly the written rationale that explains the recommendation. That last one is where Report 840 bites.

AI is extraordinarily good at producing a paragraph that reads like a justification — fluent, confident, well-structured. What it can't do is know why this loan is right for this client, because that reasoning lives in a conversation it wasn't part of. A polished AI rationale that doesn't actually turn on the client's circumstances is precisely the evidence gap ASIC described, and it's more dangerous than a rough one, because it looks finished enough to sign without a second read. ASIC doesn't care what drafted the file; the duty attaches to you. We said as much when we wrote that the file has to show the why, not just the what — Report 840 is the regulator proving it with a number.

This is a cost-intelligence habit before it's a compliance one: knowing which part of your process carries the judgement, and refusing to automate that part. If you're not sure where AI sits in your recommendation workflow today — and where it must not — map your own exposure first. It takes minutes and it's honest about the line.

What to do before Report 840 becomes a review of your group

Let AI draft; don't let it decide. Use it for the low-judgement work — collecting documents, researching lender policy, assembling the file — where it's strongest and the compliance risk is lowest. Then write the one sentence it can't: the specific, client-reasoned "this costs more, and here's why it's still the better call for you." Not a template, not a generic benefit — the actual trade-off. The lower rate wasn't worth the exit fees. The offset mattered more than the headline rate. The lender's turnaround met a settlement deadline. If someone reviewing the file in two years can't see that reasoning, ASIC's position is that it isn't there. Build that check into your process now, while fixing it is cheaper than explaining it.