Unfair Contract Terms: Broker Contract Checks in 2026

When the Unfair Contract Terms Rules Apply

Protection depends on the agreement meeting the relevant coverage requirements and the term falling within the reviewable provisions. A clause can be commercially unattractive without meeting the legal test for unfairness.

Australia has two closely related regimes. The Australian Securities and Investments Commission (ASIC) administers the financial products and services provisions in the Australian Securities and Investments Commission Act 2001. The Australian Consumer Law (ACL), in Schedule 2 of the Competition and Consumer Act 2010, covers other relevant supplies and land transactions.

The Australian Competition and Consumer Commission (ACCC) shares ACL enforcement with state and territory consumer agencies. A broker’s involvement doesn’t put every supplier or aggregation agreement under the ASIC Act.

Check the Contract’s Coverage

Coverage question	ASIC Act	Australian Consumer Law
What is supplied?	A financial product or financial service	Relevant goods, services or an interest in land
Who qualifies as a consumer?	An individual acquiring the supply wholly or predominantly for personal, domestic or household use	An individual acquiring the supply wholly or predominantly for personal, domestic or household use
What is the current small-business size test?	At least one business party employs fewer than 100 people or has turnover below $10 million for its last income year	At least one business party employs fewer than 100 people or has turnover below $10 million for its last income year
Is there a small-business contract price cap?	Upfront price of $5 million or less, disregarding interest when credit is provided	No upfront contract price cap
Must the contract be standard form?	Yes	Yes

These are the expanded settings explained in ASIC’s account of the reforms. Their application to an older agreement depends on its entry, renewal and variation history. The small-business cap is separate from the consumer-contract test.

Standard form usually means one party prepares the terms and the other has little effective opportunity to negotiate them. Minor edits or a choice between prepared options don’t necessarily change that status. Keep evidence of the actual negotiations, including terms the other party refused to discuss.

For the ASIC employee test, count regular and systematic casuals and treat part-time employees as an appropriate fraction of a full-time equivalent. Apply the employee-counting rules of the actual regime, rather than using an informal team headcount.

Separate Excluded Terms From Reviewable Powers

Terms defining the main subject matter or setting the disclosed upfront price are generally excluded from this unfairness review. Terms required or expressly permitted by law are also excluded to the relevant extent. The ASIC Act contains further exclusions for terms included through the operation of other laws and for particular contract categories.

A disclosed loan interest rate and a power to change that rate are different terms. Default fees and other contingent charges can be reviewable even when the original price term is excluded. ASIC’s consumer guidance explains this distinction for financial contracts.

Recognise a Potentially Unfair Term

Assess the clause against all three parts of the legal test, with the contract as a whole. Under section 12BG of the ASIC Act and section 24 of the ACL, the term must:

1. Cause a significant imbalance in the parties’ rights and obligations if used.
2. Not be reasonably necessary to protect the benefiting party’s legitimate interests.
3. Cause financial or other detriment if applied or relied on.

The benefiting party must prove that the term is reasonably necessary to protect its legitimate interests. A reviewer therefore needs the commercial reason for the power, along with evidence that its scope fits that reason.

Transparency also affects the assessment. Readability, plain language and ready availability matter, but a bold heading or signed acknowledgement doesn’t establish fairness. A clearly presented term can still give one party unjustified rights.

Warning Signs to Investigate

Clause type	Concern to record	Facts that can change the assessment
Unilateral variation	One party can change fees or services without meaningful limits	Defined reasons, notice and a practical right to exit without penalty
Broad indemnity	A client or broker must cover losses outside their control	Who caused the loss, exclusions for the beneficiary’s conduct and control over claims
One-sided termination	One party can end the arrangement while the other remains locked in	Grounds, reciprocal rights, a chance to remedy breach and consequences for work in progress
Fee or payment retention	Money can be retained regardless of services delivered	What the payment covers, when it is earned and the reason for retention
Liability exclusion	A supplier avoids responsibility while the other party carries the loss	The service promised, statutory rights and how risk is allocated elsewhere

These are screening questions, not findings that every clause of these kinds is unlawful. A genuine commercial risk can justify protection. The question is whether the particular power goes further than reasonably necessary and meets the remaining unfairness requirements.

ASIC’s financial-services examples include a lender’s broad variation power on five days’ notice. Its concern includes whether the borrower has a realistic opportunity to refinance or sell assets before exiting. A nominal exit right can be ineffective in practice.

For non-financial services, the ACCC’s contract guidance compares broadband contracts with price-change powers. An effective penalty-free exit right can alter the assessment. Both examples show why the surrounding rights and practical consequences belong in the review.

Apply the Test to Brokerage Agreements

Screen a brokerage agreement by tracing who can exercise each power and what happens to the other party when it is used. Read incorporated schedules and policies alongside the signed document, including any later fee notice.

When Your Brokerage Issues the Client Template

Your brokerage controls the wording it offers clients. Ask the principal or compliance lead to own template approval, with legal advice on the applicable regime and disputed provisions. A loan writer or administrator who spots a concern records it and refers it before the template is reused.

Check whether the engagement lets the brokerage change its fee after work starts or retain payment after the service ends. Review any client indemnity and any exclusion of responsibility for the brokerage’s own conduct. Compare each power with the service actually promised and the client’s rights elsewhere in the agreement.

For example, a fee for completed work needs a different assessment from an automatic charge for every cancellation, regardless of work performed. Record the trigger and the commercial explanation before deciding whether the price exclusion or unfairness test applies.

When Your Brokerage Receives an Aggregator’s Template

As the recipient, your brokerage needs to understand its rights over the life of the arrangement and after exit. Ask the principal to coordinate the review with the compliance lead and an adviser who understands aggregation contracts.

Inspect rights to change the fee schedule, terminate access or withhold payments. For trail or other commission, identify when the entitlement arises and which events allow deductions or retention. Review indemnities against the brokerage’s actual control over the conduct causing the loss.

Document any notice and exit rights, then assess whether the brokerage can realistically use them. Contract risk is one part of a mortgage aggregator decision alongside panel access and support. A favourable commercial offer doesn’t resolve the legal assessment of its terms.

Worked Review of a Fictional Clause

Suppose a fictional aggregator agreement says: “The aggregator may change any fee at any time without notice, and the broker must continue paying until the agreement ends.”

The stated commercial purpose is to recover increases in service costs. The reviewer records that purpose, then works through the clause:

1. Identify its reach. It covers every fee, gives no defined trigger and provides no notice before the change takes effect.
2. Read the exit provisions. Establish whether the broker can end the agreement and what happens to accrued commission or other entitlements.
3. Test the justification. Ask why cost recovery needs an unlimited power and what evidence supports the proposed increase.
4. Discuss narrower alternatives with the adviser and counterparty. These could address defined costs, adequate notice or an effective exit right, with the remaining contract checked for consistency.

The review ends with advice and an agreed action, not a declaration that adding notice makes the clause compliant. The final wording still needs assessment against the whole agreement and applicable law.

Changes, Penalties and Enforcement in 2026

The current regime prohibits making a covered standard form contract containing an unfair term that the person proposed. It also prohibits applying or relying on an unfair term, including purporting to do so. A prior court declaration isn’t a prerequisite for those prohibitions.

Each unfair term proposed in the covered contract can be a separate contravention. A civil penalty is separate from the term’s invalidity and from orders compensating an affected party. The court determines the contravention and penalty.

Keep the Two Penalty Scales Separate

Under the ACL’s current corporate scale, the maximum is the greatest applicable amount: $100 million, three times the attributable benefit or the turnover-based amount. The turnover limb applies when the benefit can’t be determined and is 30% of adjusted turnover during the breach turnover period. The individual maximum is $2.5 million.

The ACCC’s penalties guidance explains the conduct-based commencement rules. Earlier conduct can attract a different maximum. These ACL figures must not be carried across to an ASIC Act contract.

Under the ASIC Act, the corporate maximum uses the greatest of 50,000 penalty units, three times the benefit derived and detriment avoided, or its turnover limb. That limb is 10% of annual turnover for the specified period, capped at 2.5 million penalty units. The individual scale uses the greater of 5,000 penalty units or three times the benefit derived and detriment avoided.

Section 12GBCA of the ASIC Act sets that calculation. A penalty unit is a statutory monetary unit whose dollar value depends on the applicable law and timing. The maximum is a ceiling, not an automatic charge for each complaint.

Review Contract Events as Well as the Original Signature

The 2023 reforms apply to contracts made or renewed from their commencement, and to terms varied or added from that point. Changes to the standard form assessment can apply to the whole contract when a term is varied or added. Use the official commencement details for the actual transaction, rather than treating every agreement signed during a year alike.

Retain the original contract and each renewal or variation. An old signature doesn’t establish that every later term falls outside the reforms. Earlier protections can also remain relevant to older wording.

If a court finds a covered term unfair, it is void and the rest of the contract continues if it can operate without that term. Other available orders can include refunds, contract variation or restrictions on future use. Don’t treat the suspected invalidity of one clause as permission to abandon the entire agreement.

Escalate the Clause and Keep the Review Record

Record the concern before relying on the clause or reusing the template. The staff member who identifies it must give the principal or compliance lead enough information to locate the exact wording and decide the next action.

Keep the following fields together in the contract review record:

• The contract version, parties and service supplied.
• Entry, renewal and variation details, with the documents retained.
• The clause number and complete wording, including incorporated provisions.
• The right affected, who benefits and the practical harm if the term is used.
• The commercial purpose and relevant rights elsewhere in the contract.
• The reviewer, advice requested and response received.
• The agreed action, responsible person and deadline.

Send the counterparty a specific concern and requested outcome, such as explaining the power or discussing an amendment. For financial-service complaints, start with the firm’s internal dispute resolution process. The Australian Financial Complaints Authority (AFCA) may then be available, subject to its jurisdiction and complaint rules.

ASIC’s small-business guidance describes that route and the option of reporting misconduct. AFCA can give remedies within its scheme, and an accepted determination can bind the financial firm. An aggregator dispute doesn’t automatically qualify simply because it involves a broker.

For an ACL matter, use the counterparty’s complaint process and the relevant consumer agency or business dispute service. Reporting to ASIC or the ACCC can inform enforcement, but it doesn’t secure individual compensation or a binding ruling on your clause. Obtain legal advice about the appropriate court or other available dispute route when the parties can’t resolve the issue.

Replace the Template and Check Existing Engagements

After legal review, the principal approves the replacement template and records its version. Remove the obsolete version from the forms staff use, retain an archive copy and update any automated engagement process. Tell staff which version applies to new work and who approves exceptions.

Identify existing engagements using the old version, including renewals and pending fee changes. Changing the master template doesn’t amend those contracts. Record separate advice and any required agreement with the affected counterparty before changing their terms.

Keep this contract review distinct from the best interests duty assessment of a mortgage recommendation. A clear engagement agreement and a supported lender recommendation answer different obligations.

Identify the Applicable Regime

Choose the regime from the supply made under the actual agreement, then apply its coverage rules to the parties and contract history. Start with the ASIC financial-products framework for a home-loan contract. A brokerage’s ordinary non-financial supplier contract points to the ACL.

A client engagement or aggregation agreement needs closer classification of the services supplied. Record the adviser’s conclusion on which provisions apply, especially where the arrangement combines financial and other services. Then use that regime’s exclusions and legal test before identifying a remedy.

The national frameworks also apply in Victoria, Queensland and New South Wales. State consumer agencies and available dispute routes differ, but the state’s name alone doesn’t choose between ASIC and the ACL. Send the reviewer the complete agreement and the proposed action before anyone demands payment or exercises a disputed termination right.