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The CSLR plays a vital role in Australia’s financial services dispute resolution framework. A failure by a financial firm to pay compensation awarded to someone by the Australian Financial Complaints Authority (AFCA) is often a sign that something has gone very wrong with the firm.

The CSLR prevents people in these situations from suffering the full cost of the firm’s professional misconduct. By preventing victims of misconduct from bearing the full cost of that misconduct, the CSLR provides consumers with confidence in the integrity of Australia’s financial system. In the wake of several recent high-profile failures, maintaining consumer confidence is more important than ever.

The sustainability of the CSLR depends on preventing harm before it occurs. The recommendations made in our joint submission to the consultation on lead generation and the Super Consumers Australia submission to the consultation on enhancing member protections are essential to address the scheme’s funding pressure. These recommendations will address the conduct that has driven consumers to make the majority of CSLR claims to date, and closing these loopholes will help stabilise the scheme over time.

Broadening the charging base, including SMSFs and MISs within the special levy framework will distribute these costs across the sectors most connected to these losses. Expanding the funding base will make the scheme more sustainable while upstream prevention reforms take effect. The people who have suffered financial harm through misconduct should not be punished to relieve the scheme’s funding pressures. Cutting compensation is a band-aid solution that says to Australians we are not confident we can reduce risks in the system. Industry, government, regulators and consumer groups are custodians of this system. We have a collective responsibility for its failures and for preventing this harm from occurring again.

Read the full submission and recommendations (PDF).