The Compensation Scheme of Last Resort (CSLR) legislation has passed in Parliament today.
The Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023 [and associated bills] passed both houses on 22 June.
The bills propose to establish a CSLR that will provide compensation to victims of financial misconduct who have received a determination in their favour from the Australian Financial Complaints Authority (AFCA) but who have not been paid.
This is typically because the financial institution involved in the misconduct has become insolvent.
There are around 2,000 cases on hold with AFCA that are awaiting passage of the CSLR while others are still waiting for redress to be paid.
The government will fund the costs to establish the body that will operate the CSLR, including funding the costs of the first levy period through to the end of the 2023‑24 financial year. The scheme will then be funded by industry for future years.
Consumers will be able to lodge claims for compensation from April 2024, with the first compensation payments to follow shortly thereafter.
Minister for Financial Services, Stephen Jones, said: “A huge win for victims of financial misconduct today. The Albanese government’s legislation will provide over $230 million for over 2,000 potential victims.
“This is one of the last recommendations of the banking royal commission and will go a long way in helping victims.”
A statement from the Financial Services Council (FSC) said: “The Financial Services Council welcomes the passage of legislation to implement the Compensation Scheme of Last Resort today in Parliament.
“The scheme will provide consumers with a safety net up to $150,000 for eligible unpaid Australian Financial Complaints Authority determinations. This policy has had bipartisan support and will provide consumers with a valued safety net.”
The bill was introduced to Parliament back in March 2023 after being removed from the Credit Act at the end of 2022.
The CSLR had been in discussion since 2016 when it was first raised by the Ramsay review regarding the establishment of a financial system dispute resolution framework.
Consumers will be able to lodge claims for compensation from April 2024, with the first compensation payments to follow shortly thereafter.
Minister Jones ensured the ALP Big Business donors don’t have to fund what is usually always product provider failures; instead small financial advice businesses are left with this extra Great Big new tax.
OK great, now we will have another fund that all good advisers need to contribute to, to take care of all the bad advisers who fleeced their customers, which will add another layer of costs above ASIC fees. Then there will be costs to manage this fund so another lot of infra costs especially when they mismanage the funds. Anyway, wasn’t this what the PI cover was to pay for?
I have lived in 6 other countries and this is the first ‘Western’ country, with its parliamentary democracy etc etc and I am astounded, truly astounded with the ease with which regulators arm themselves with powers, for which there is just no accountability. You would think this happened only where there were tin-pot dictators. Guess not so..
Another Real Adviser killing Levy.
Utterly disgusted Managed Investment Schemes are NOT included to pay for this.
Just wondering how this is going to be funded. Another Levy???
It might be a huge win for greedy investors who invested in a “too good to be true scheme”, but its a huge loss for the advised community and financial advisers who are doing the right thing. A complete “get-out-of-jail-free-card” for for MIS.
Thank goodness I’m out of this industry in a little under 100 days if all goes well…