Current Matter CSLR Legislation

On 22 June 2023, the Australian Parliament passed legislation establishing a Compensation Scheme of Last Resort (CSLR). 

The CSLR will facilitate the payment of up to $150,000 in compensation to eligible consumers who have received an AFCA determination awarding compensation in relation to complaints in one of four areas: personal financial advice, credit intermediation, securities dealing or credit provision. 

We are pleased for those people who will be eligible to lodge a claim with the CSLR, as set out by the legislation. We also acknowledge that others will be very disappointed if they do not qualify.

The scope of the CSLR is a matter of government policy, and a separate and independent company will manage the compensation scheme. 

As an independent and impartial ombudsmen service, AFCA is reviewing the status of complaints it has had on pause because of firm insolvency.

We will contact complainants as this work progresses. Complainants do not need to do anything in the meantime. 

What should complainants do now? 

AFCA thanks complainants for their patience as we work through paused complaints with the care and rigour that’s required. 

We will continue to contact complainants as we progress this work –  there is no need to do anything in the meantime

When will CSLR start? 

The Federal Government intends for the CSLR to commence operations in April 2024. 

An interim website has been set up for further information and updates. 

Paused complaints update – February 2024 

AFCA commenced our review of paused complaints immediately after the passing of the CSLR legislation in June 2023. At that time, there were approximately 5,000 consumers seeking an outcome. 

We do not underestimate the importance of providing people with finality to their complaint. It is important that we balance timeliness with the need to thoroughly investigate each individual case with the care and rigour required. 

We have reviewed many of these complaints to determine, at a high level, how many may be within scope of the CSLR. The scope set out in the legislation, provides access for eligible consumers who have an unpaid determination from AFCA relating to the following sub sectors: 

  • Personal financial advice provided to retail clients on relevant financial products 
  • Dealing in securities for retail clients (but not issuing securities) 
  • Providing credit (where a financial firm provides funds) 
  • Arranging credit (where someone like a mortgage or finance broker arranges funds). 

Currently, at a high level we have assessed that approximately 2,000 complaints may fall within the CSLR scope. Just over 1,800 of these complaints were lodged with AFCA on or before 7 September 2022, designated as ‘pre-CSLR ‘in the legislation (this is currently approximately 88% of in-scope complaints). However, complaint numbers for eligible CSLR complaints are subject to change, due to: 

  • Detailed investigations progressing with new information presented that changes our initial assessment of CSLR eligibility.
  • Complaints lodged during the ‘pre-CSLR’ period (1 November 2018 and 7 September 2022) may also be included if the Financial Firm becomes insolvent during or after the AFCA process is finalised, but prior to paying compensation awarded in the AFCA determination. Since June 2023, over 100 AFCA cases fall into this category and will form part of the pre-CSLR complaint backlog, if eligible.

AFCA is committed to sharing updates on the progression of these in-scope complaints for CSLR. 

What we’ve done:

  • Increased our expert workforce to commence work immediately on these complaints once the legislation passed. With the certainty provided by the passing of this legislation in June 2023, this workforce investment has continued. 
  • Reviewed complaints at a high level to determine how many may fall within the scope of the CSLR legislation. 
  • Consulted industry and published the AFCA Approach to ‘Determining compensation in complaints against Financial Advice Firms where the Responsible Entity of a Managed Investment Scheme has become insolvent’ to ensure clarity and transparency of determinations. 
  • Assembled dedicated teams of expert case resolution experts within CSLR eligible subsectors to prioritise complaint investigations. 
  • Communicated with many impacted consumers whose complaints have been on pause to let them know if AFCA can progress their complaint. Where the complaint is not eligible for CSLR, AFCA will not progress the complaint. 
  • Commenced investigations on in-scope complaints and issued determinations for eligible complaints. Where AFCA has awarded compensation in favour of the consumer, they can raise a claim with CSLR from April 2024 when operations commence. 
  • Reviewed past AFCA determinations which remain unpaid due to financial firm insolvency. CSLR referral information has been provided to consumers where their complaint may be eligible, to raise a claim with CSLR from April 2024. 

Over the coming period we will: 

  • Continue investigations of paused complaints. Eligible complaints for CSLR will be finalised, so consumers can raise a claim with CSLR. 
  • Accelerate work on the significant number of Dixon Advisory complaints. Updates are provided here.
  • Continue to seek opportunities for efficiencies through resourcing and technology to accelerate this important work. 
  • Provide further updates on this page as this work progresses. 

Paused complaints background 

In April 2020, AFCA paused complaints against insolvent financial firms while awaiting detail of the scope and timing of a CSLR. 

With the passing of the CSLR legislation, AFCA is now able to review the status of those paused complaints – which totalled 4,875 as at 1 June 2023. 

These complaints include "closed” matters where there has already been an AFCA determination but no payment by the firm, as well as “open” complaints that AFCA has not yet considered because they were placed on pause. 

AFCA will need to consider a range of questions for each open or closed complaint, in particular whether a complaint broadly falls within the scope of the CSLR, as laid out in the legislation

With regard to an “open” complaint, AFCA will also need to consider whether the complaint is within AFCA’s jurisdiction, if this hasn’t already been determined – that is, whether it is the type of complaint AFCA is permitted to consider. 

The high number of “open” complaints on pause means this work – the initial review and then consideration of the merits of individual complaints – will take some time. 

Scope of the CSLR 

The CSLR will provide compensation of up to $150,000 to eligible consumers who have an unpaid determination from AFCA relating to: 

  • Personal financial advice provided to retail clients on relevant financial products 
  • Dealing in securities for retail clients (but not issuing securities) 
  • Providing credit (where a financial firm provides funds) 
  • Arranging credit (where someone like a mortgage or finance broker arranges funds). 

Other financial services will be outside the scope of the CSLR, such as: 

  • Managed investment schemes (a form of collective investment where investors pool money to be managed by a third party, such as a property fund or agricultural scheme). 
  • Dealing in foreign exchange or derivatives
  • Arranging insurance (e.g. through a broker) 
  • Funeral insurance 

Please note this is not an exhaustive list. You can view the details of the legislation here.

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