A diverse coalition of organisations is calling for a broad financial compensation scheme, as legislation is expected to be introduced into Federal Parliament in the coming weeks.
The coalition, which includes consumer groups, professional financial advice associations, financial counsellors, professional accounting associations and community legal centres are calling on the Federal Government to expand the proposed compensation scheme of last resort (CSLR).
The groups are calling for the proposed legislation to be expanded to provide compensation for all financial products and services that fall under the jurisdiction of the Australian Financial Complaints Authority (AFCA). The Government’s draft bill will exclude vast segments of the financial industry, including managed investment schemes and the funeral expenses industry, leaving many victims of financial misconduct without redress. It will also mean that a number of large financial institutions including product providers are not required to contribute to the costs of compensation.
Alan Kirkland, Chief Executive Officer of CHOICE said,”when the Government announced its response to the Banking Royal Commission, we welcomed the commitment to establish a compensation scheme. Now, some 32 months since that commitment, the scheme proposed by the Government is incredibly disappointing. it will leave too many victims of financial misconduct without access to the compensation they deserve.
“The Government’s proposal will exclude victims of managed investment scheme collapses, like the many elderly Australians who lost their savings through the collapse of Sterling First. It will also exclude consumers from First Nations communities who were tricked into paying for funeral expenses policies by the Aboriginal Community Benefit Fund, now trading as Youpla.
“One of the reasons we had a Banking Royal Commission was because thousands of victims of financial misconduct had been left without compensation. The establishment of a compensation scheme was one of the Royal Commission’s most important recommendations. The Government’s proposals fail to live up to the spirit and letter of the Royal Commission’s recommendations,” said Mr Kirkland.
– In response to the Banking Royal Commission, the Federal Government committed to
introduce the Compensation Scheme of Last Resort into the House of Representatives by 30 December 2020.
– The Government delayed these reforms another six months until 30 June 2020 due to COVID19.
– On 16 July 2021, the Australian Federal Government released its proposal for the
Compensation Scheme of Last Resort
– The proposed scheme will only apply to five financial products and services: personal advice on relevant financial products to retail clients, credit intermediation, securities dealing, credit provision, and insurance product distribution.
– The following organisations are calling for a broad-based compensation scheme of last resort:
Association of Financial Advisers
Boutique Financial Planning Principals Association
Chartered Accountants Australia and New Zealand
Consumer Action Law Centre
Consumer Credit Legal Service (WA) Inc
Council of the Ageing (COTA)
Financial Rights Legal Centre
Financial Counselling Australia
Financial Planning Association of Australia
Institute of Public Accountants
Super Consumers Australia