Recommendation 7.1 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) recommended that the three principal recommendations to establish a Compensation Scheme of Last Resort made by the Supplementary Final Report of the Review of the financial system external dispute resolution and complaints framework (Ramsay Review) should be carried into effect.
In its response to the Royal Commission, the Government committed to establish a forward-looking and industry-funded compensation scheme which extends beyond personal advice failures. The establishment of the Compensation Scheme of Last Resort will support ongoing confidence in the financial system’s dispute resolution framework by facilitating the payment of limited compensation to eligible consumers who have received a determination for compensation from the Australian Financial Complaints Authority which remains unpaid.
The Government has released for public consultation exposure draft legislation that would establish the Compensation Scheme of Last Resort. The draft legislation contains the key features of the scheme, including the ability to authorise an operator of the scheme, eligibility requirements, compensation available for each eligible AFCA determination, the levying framework to fund the scheme, and the governance of the scheme.
To support the draft legislation, the Government has also released a proposals paper, which outlines the Government’s proposals in relation to various aspects of the CSLR. These aspects include scope, payment arrangements, funding arrangements, governance and mechanisms to maintain the integrity of the scheme.