Eight consumer organisations have joined with eight industry bodies to call for an expansion in the compensation scheme of last resort (CSLR) legislation.
The eight consumer groups were CHOICE, Consumer Action Law Centre, Consumer Credit Legal Service (WA) Inc, Council of the Ageing (COTA), Financial Rights Legal Centre, Financial Counselling Australia, Super Consumers Australia and Uniting Communities.
They had joined eight industry bodies, Chartered Accountants Australia and New Zealand (Chartered Accountants ANZ), CPA Australia, Financial Planning Association of Australia (FPA), Institute of Public Accountants (IPA), SMSF Association (SMSFA), Association of Financial Advisers (AFA), Stockbrokers and Financial Advisers Association (SAFAA) and the Boutique Financial Planning Principals Association in opposition to the legislation in its current state.
The groups were calling for the proposed legislation to be expanded to provide compensation for all financial products and services that fall under the jurisdiction of the Australian Financial Complaints Authority (AFCA).
The Government’s draft bill would exclude vast segments of the financial industry, including managed investment schemes and the funeral expenses industry, leaving many victims of financial misconduct without redress. It would also mean that a number of large financial institutions including product providers were not required to contribute to the costs of compensation.
Dante De Gori, FPA CEO, said consumers deserved the same protections and access to compensation regardless of where they made their purchase.
“Consumers purchase financial services and products from a broad range of product providers, manufacturers and professionals,” De Gori said.
“A last resort compensation scheme must operate equally and fairly across the entire sector to ensure consumers have faith in the system.
“The Government must ensure that those product manufacturers who profit from consumers’ investments, also contribute to compensation.”
Alan Kirkland, CHOICE chief executive, said the organisation had welcomed the scheme when it was originally announced during the Royal Commission but that action since then had been “disappointing”.
“Now, some 32 months since that commitment, the scheme proposed by the Government is incredibly disappointing,” Kirkland said.
“It will leave too many victims of financial misconduct without access to the compensation they deserve.
“The Government’s proposal will exclude victims of managed investment scheme collapses, like the many elderly Australians who lost their savings through the collapse of Sterling First.
“It will also exclude consumers from First Nations communities who were tricked into paying for funeral expenses policies by the Aboriginal Community Benefit Fund, now trading as Youpla.”
Kirkland said one of the reasons the Royal Commission happened was because thousands of victims of financial misconduct had been left without compensation.
“The establishment of a compensation scheme was one of the Royal Commission’s most important recommendations,” Kirkland said.
“The Government’s proposals fail to live up to the spirit and letter of the Royal Commission’s recommendations.”
The legislation was expected to be introduced into Federal Parliament in the coming weeks.
