The Financial Ombudsman Service has deployed extra firepower in its campaign to establish a statutory consumer compensation scheme, issuing a second round submission to the Financial System Inquiry backed by a Grant Thornton report setting out funding options and operational details for such a scheme.The FSI acknowledged the proposal in its interim report, although it cautioned that "some argue that a statutory compensation scheme would increase moral hazard risk."The Corporations Act requires licensed entities to have compensation arrangements in place to ensure any awards of compensation to customers for breaches of the law are able to be paid.FOS's concern is that a significant number of customers who have been awarded compensation are not being paid.According to FOS, since 2010, 22 financial services providers have been unwilling or unable to comply with FOS determinations worth A$10.1 million.FOS said: "Consumers must have confidence that when things go wrong they will be compensated when there is a decision made in their favour."FOS supports the establishment of a default consumer protection scheme, funded by all relevant licensed entities in the financial products distribution process. The scheme would enable the establishment of a fund to ensure consumers are paid when awarded compensation in a FOS decision. The scheme would be structured as a legal entity separate from FOS."Grant Thornton's funding options range from initial raisings of $10 million to $22 million.More broadly, FOS said it wanted the current approach to consumer protection regulation to be "reframed".It said: "The consumer protection regime that developed after Wallis treated different players in the industry as distinct activities subject to separate functional and disclosure-based approaches. Given the consolidation and integration within the financial sector the approach to consumer protection needs to be shaped around a sector where product origination, risk management, intermediation and distribution operate as an integrated value chain."FOS supports product issuers having appropriate responsibilities for the suitability of their products and for the expertise, professionalism and conduct of those they engage to distribute the products.It also supports the views of the Inquiry on conflicted remuneration as well as initiatives to improve competency, including the establishment of a register of individual advisers.