The Compensation Scheme of Last Resort (CSLR) has officially commenced operations, with eligible consumers who have received an unpaid Australian Financial Complaints Authority (AFCA) determination as a result of financial misconduct now able to lodge a claim for up to $150,000 in reparation.
The introduction of the scheme stems from the 2017 Ramsay review and was backed by the financial services royal commission, which recommended establishing a framework for victims of financial misconduct to receive compensation where the financial firm involved becomes insolvent or does not pay compensation awarded under an AFCA determination.
Assistant Treasurer and Financial Services Minister Stephen Jones stated: “The Compensation Scheme of Last Resort will strengthen consumer trust and confidence in Australia’s financial system. This scheme will give victims an avenue for redress when things go wrong.
“The government stands with consumers to ensure there are robust protections in place for them. The government ensured that the Hayne royal commission was established and is proud to implement one of its final recommendations.”
CSLR chief executive David Berry noted the levy contribution on behalf of the financial services industry will lead to better outcomes, both for consumers and the industry more widely.
“People left without redress for misconduct suffer both financial and emotional stress. Our task is to ensure that those who have experienced financial loss through no fault of their own receive recompense, in line with the legislation that underpins our work,” Berry said.
“By having contributions from industry, the scheme will not only be able to compensate eligible claimants, but will also encourage industry to support strong standards, enhancing trust and confidence in the financial services sector.
“We are focused on delivering a scheme that operates efficiently, economically and effectively.”
Consumers will be required to undertake a three-step process consisting of lodging a complaint to AFCA about a financial firm’s misconduct, allowing the completion of the AFCA complaint process, including the awarding of compensation, and having the financial firm fail to pay the compensation determined, which must be reported to the complaints authority.
Once this chain of events has occurred, consumers can then apply for CSLR money.
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