26 September 2023

AFCA seeks back-stop compensation scheme

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The Australian Financial Complains Authority (AFCA) has published its submission to Treasury in support of the establishment of a compensation scheme of last resort (CSLR).

In a submission to the Government, AFCA said it had long advocated for a compensation scheme of last resort to fill a major gap in protection for consumers of financial services.

Chief Ombudsman and Chief Executive of AFCA, David Locke (pictured) said a compensation scheme of last resort was an important back-stop that ensured people who had been the victims of misconduct, and lost out through no fault of their own, could be compensated when the financial firm was unable to pay.

“Without this measure there is a significant gap that will cause considerable hardship to consumers who have done nothing wrong,” Mr Locke said.

“They have suffered financial loss, taken appropriate action through AFCA, only for that outcome not to be honoured by the financial firm.”

He said the establishment of a broad-based compensation scheme covering the financial services industry was an important part of restoring consumer trust and confidence in the financial services sector following the Royal Commission.

“This rebuilding of trust is in the interests of all financial services firms and all Australians,” Mr Locke said.

“We look forward to working with the Government and stakeholders to implement this important reform.”

The 15-page submission can be accessed at this PS News link.

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