The Australian Financial Complaints Authority (AFCA) welcomes the passage of legislation that establishes a compensation scheme of last resort (CSLR).
“The establishment of a CSLR was an important recommendation from both the Ramsay Review of 2017 and the Hayne Royal Commission of 2019, and one we have long supported,” AFCA’s Chief Executive Officer and Chief Ombudsman, David Locke, said.
With the passing of the CSLR legislation yesterday, AFCA will now begin reviewing the status of complaints that it had placed on pause because they involved insolvent firms.
As Australia’s national financial ombudsman service, AFCA will also continue to work with consumers, including small businesses, and financial firms to resolve individual financial disputes, making formal determinations where agreement can’t be reached between the parties.
An independent CSLR company will be responsible for managing access to compensation under the scheme if a firm does not pay an AFCA determination.
Broadly speaking, 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, credit intermediation, securities dealing and credit provision. The legislation sets out a number of other elements for eligibility and identifies which matters fall outside its scope.
Mr Locke noted that the Federal Government had asked AFCA to help set up the new CSLR organisation. The CSLR operator will be established as an independent, not-for profit company with its own board, and with funding arrangements put in place by the federal government.
The Federal Government has said consumers will be able to lodge claims for compensation from April 2024, with the first compensation payments to follow shortly. You can see the Federal Government’s media release here.
For more information, see also AFCA's Current Matter page for the CSLR.
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