AFCA and its predecessors have been strong supporters of a compensation scheme of last resort (Compensation Scheme). AFCA firmly believes that Australia needs a Compensation Scheme to protect people who lose out through no fault of their own, when their financial firm becomes insolvent.
Following the Government announcing in February 2019 that it would be establishing a Compensation Scheme, AFCA began receiving and dealing with complaints against insolvent financial firms. Previously, if a financial firm became insolvent, these complaints would not have been dealt with by AFCA or its predecessor schemes, as there was no prospect of the consumer receiving compensation.
AFCA acknowledges that the COVID-19 pandemic has subsequently become the key priority and focus for the Government, and as a result it is unclear what the impact will be on the establishment of a compensation scheme of last resort.
Until there is certainty provided about the scope and timing of the Compensation Scheme, AFCA has reviewed and put in place appropriate arrangements for dealing with any complaints it receives against insolvent financial firms. AFCA will put a pause on processing complaints against insolvent firms, this includes existing and new complaints. AFCA will accept future complaints about insolvent financial firms, but we will hold them over until there is more clarity about the Compensation Scheme, and the parameters of the scheme.
AFCA is concerned about putting consumers through the whole complaint resolution process, if they still might not have any chance of getting compensation.
AFCA looks forward to the creation of a Compensation Scheme, as it protects public confidence in the financial system and ensures appropriate redress and justice is provided to consumers who currently receive awards of compensation but do not receive payment.
Published: 14 April 2020
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The Australian Financial Complaints Authority (AFCA) is a non-government ombudsman service providing free, fair and independent help with financial disputes. It is a one-stop-shop for consumers and small businesses who have a dispute with their financial firm, over things such as banking, credit, insurance, advice, investments or superannuation. Where an agreement cannot be reached between parties, AFCA can issue decisions that are binding on financial firms.