The last resort compensation scheme has been approved by the Senate

The Senate has successfully passed legislation for the Compensation Scheme of Last Resort (CSLR), paving the way for the implementation of the reform endorsed by the Hayne royal commission. This reform aims to provide financial restitution to consumers in need of redress.

Through the Compensation Scheme of Last Resort (CSLR), consumers with unpaid determinations from the Australian Financial Complaints Authority (AFCA) will be eligible for compensation of up to $150,000. This coverage extends to personal financial advice given to applicable retail clients on relevant products.

Funeral insurance and insurance arranged through a broker are not included under the coverage of the Compensation Scheme of Last Resort (CSLR).

Financial Services Minister and Assistant Treasurer Stephen Jones described the passage of the legislation as a significant victory for over 2000 individuals who have been eagerly awaiting a resolution to their cases.

“The implementation of this measure fulfills one of the remaining recommendations of the Hayne royal commission.”

According to Mr. Jones, consumers will have the opportunity to file compensation claims starting from April next year, and the initial compensation payments will soon follow thereafter.

“To expedite the commencement of the CSLR, the government will provide funding for the establishment of the operating body, covering the costs for the initial levy period until the conclusion of the 2023/24 fiscal year,” Mr. Jones stated.

Following the 2023/24 period, the funding for the last resort compensation scheme will transition to industry levies.

With the passage of the CSLR, which was approved by the House of Representatives in March, AFCA will now initiate a review of complaints that were previously put on hold due to the involvement of insolvent firms.

AFCA expressed their satisfaction regarding the eligibility of individuals to file claims under the CSLR, as outlined by the legislation.

As an independent and unbiased ombudsman service, AFCA will proceed with reviewing the status of complaints that were previously put on hold due to insolvency of the involved firms.

With nearly 5000 complaints currently on hold at AFCA, the review process is expected to require a significant amount of time to reach completion.

Starting from April 2020, AFCA has suspended complaints against financially insolvent firms, awaiting clarity on the extent and timeline of the CSLR.

Consumer advocate Choice recognizes the CSLR measure as one of the key recommendations made by the Hayne royal commission.

“The compensation scheme has filled a significant gap in Australia’s financial system… It offers an opportunity for thousands of Australians, whose complaints have been put on hold at AFCA, to finally have their cases addressed,” stated Choice CEO Alan Kirkland.

Kirkland further suggested that once the scheme is operational, the government should evaluate the possibility of expanding it to other industries, such as managed investment schemes.



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By Ryan

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