The Australian Financial Complaints Authority (AFCA) has pushed for creating a compensation scheme of last resort (CSLR), saying it could fill a “major gap” in protecting financial services consumers post-royal commission.
In its submission to the government’s public consultation on the matter, AFCA said it has long advocated for such a regime.
The scheme would aim to compensate people who have been victims of misconduct and lost out through no fault of their own at the hands of financial services providers, even when the financial firm is unable to pay.
The CSLR was one recommendation made in the final report of the Hayne commission. The government has opened a public consultation with a discussion paper looking at four aspects of it, which are coverage (beyond financial advice), funding arrangements, compensation to be paid and managing scheme evolution.
AFCA chief ombudsman and chief executive David Locke said establishing the CSLR would be “an important part of restoring consumer trust and confidence in the financial services sector following the royal commission.”
“Without this measure there is a significant gap that will cause considerable hardship to consumers who have done nothing wrong, who have suffered financial loss, taken appropriate action through AFCA, only for that outcome not to be honoured by the financial firm,” Mr Locke said.
“This rebuilding of trust is in the interests of all financial services firms and all Australians.
“We look forward to working with the government and stakeholders to implement this important reform.”
The consultation ends on Friday.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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