Consumers bodies have joined the chorus of those against what is in the proposed compensation scheme of last resort (CSLR), as nine consumer-focused bodies say the protections for consumers have been watered down from what was promised initially.
The proposed legislation was criticised in a joint submission to Treasury by CHOICE, the Consumer Action Law Centre, Financial Counselling Australia, Super Consumers Australia, Financial Rights Legal Centre, Indigenous Consumer Assistance Network, Uniting Communities Consumer Credit Law Centre SA, Victorian Aboriginal Legal Service and the Consumer Credit Legal Service (WA).
They criticised the Government for reneging on previously promised compensation caps of $542,500 from the Royal Commission recommendations, which was now $150,000.
The Royal Commission also recommend covering disputes beyond advice claims but the draft legislation now excluded parts of the finance sector.
Alan Kirkland, CHOICE chief executive, said: “When the Government released its response to the Banking Royal Commission, it gave victims of financial scandals hope that they would finally be compensated. For many victims, those hopes have now been dashed.
“The Government committed to a scheme that could pay over $540,000 in compensation, as recommended by the royal commission, covering a broad range of financial scandals.
“The proposals now released by the Government will disappoint victims by capping compensation at $150,000 and failing to cover compensation from financial scandals in areas like managed investment schemes and funeral insurance. This will see many people go uncompensated.”
Last week, eight financial services bodies came out against the proposed legislation, criticising it for lack of accountability for product producers.
Although not part of the joint announcement, the Association of Independently Owned Financial Professionals (AIOFP) also routinely called for greater accountability of product producers.
The Federal Opposition also criticised the compensation cap being less than a third of what was recommended from the Royal Commission.
The CSLR was meant to have been in place in the middle of the year, but the Government postponed it due to budgetary reasons.
The Government announced draft legislation last month to introduce the CSLR and Financial Accountability Regime.
