The Australian Financial Complaints Authority (AFCA) has reconfirmed its strong support for creating an industry-funded scheme of last resort this Monday, dubbed the “Compensation Scheme of Last Resort” (CLSR).
The announcement from the dispute resolution authority comes just over a week after the Australian government published a public discussion paper on establishing such a compensation scheme.
The CLSR aims to ensure consumers and small businesses will receive compensation where misconduct has been carried out by a financial service provider that is unable to pay.
According to the proposal from the government, the scheme will be operated by AFCA and will extend beyond personal advice failures. Furthermore, the CLSR will compensate consumers and small businesses that have an unpaid determination from AFCA after the 1st of November, 2018.
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“A Scheme will ensure consumers who have experienced loss due to the conduct of a financial firm and have subsequently been awarded compensation as part of an external dispute resolution process, will receive that compensation,” AFCA said in its statement today.
The authority further states that itself and its predecessor schemes have long advocated for such a compensation scheme to be established. Furthermore, AFCA highlights that it is vital that the scheme is appropriately funded and governed and has coverage across all financial services.
AFCA: CLSR will play a big role
The external dispute resolution scheme believes that the establishment of the CLSR plays a big part in restoring trust and confidence in Australia’s wider financial system, which has taken a beating this year due to numerous findings of misconduct in the banking sector.
The closing date for submissions on the last resort scheme is the 7th of February 2020. According to the statement released today, AFCA will continue to engage with the Australian government and other stakeholders regarding the establishment of the scheme.