If the Government’s proposed compensation scheme of last resort (CSLR) bill is passed unchanged, victims of the Sterling Income Trust misconduct will not have access to the CSLR, according to the Financial Planning Association of Australia (FPA).
The FPA used its submission to the Senate References Committee inquiry into Sterling Income Trust to take aim at the CSLR bill.
It said if the bill passed unchanged Sterling victims would be at risk of being uncompensated for the detrimental loss they had suffered.
“This will not only have a significant impact on the wellbeing and financial security of those individuals, it will also place pressure on the social security system as victims will be forced to rely on the Aged Pension,” the FPA said.
“Providing compensation for unpaid AFCA [Australian Financial Complaints Authority] determinations has long been an issue for consumers and industry alike. It’s reasonable to expect that those who are responsible pay those who are affected. It’s just and fair.”
Currently, the scope of the CSLR did not include all financial products such as managed investment schemes (MIS), real estate income trusts (REITs), and other complex products were exempt.
“Emerging from the recommendations of the Hayne Royal Commission, the Government’s proposed compensation scheme of last resort is simply too narrow in scope, provides inadequate coverage to consumers and does not address the underlying causes of unpaid determinations,” the FPA said.
The submission noted that currently many victims had been unable to access compensation or redress through the AFCA as their complaints fell outside the external dispute resolution (EDR) scheme’s jurisdiction and that AFCA had paused complaints in relation to Sterling Income Trust until the scope of government’s CSLR was known.