A bill to establish the Financial Services Compensation Scheme of Last Resort was introduced into the House of Representatives yesterday – the third time a government has attempted to legislate this recommendation of the Hayne royal commission. The CSLR will provide compensation to consumers where they have an Australian Financial Complaints Authority determination in their favour and where the relevant financial institution has not paid the consumer in accordance with the determination. Court and tribunal rulings will be outside its scope. Compensation will be capped at A$150,000, even though AFCA can order compensation up to $540,000. AFCA determinations must relate to products or services under the following headings: credit activity, financial product advice and dealing in securities. Managed investment schemes are not covered. Compensation under the CSLR is intended to be available for eligible complaints made to AFCA since AFCA commenced operations in November 2018. Australia’s 10 largest banking and insurance groups will pay a one-off levy to fund accumulated unpaid claims between November 2018 and September 2022. The relevant minister will authorise a CSLR operator. The operator will not be allowed to consider the merits of disputes ruled on by AFCA. Consumers have 12 months after an AFCA determination to notify the ombudsman that compensation has not been paid. The CSLR operator must notify ASIC when it pays compensation and ASIC must then cancel the Australian financial services licence or credit licence of the business involved. The Coalition introduced a compensation scheme bill in 2021 but it was not passed before the 2022 election was called, and so it lapsed. The Labor government included provisions for a CSLR in a financial services reform bill last year but removed then at the last minute to do some tweaking. Some argy-bargy about the make-up of the 10 groups that will pay for the accumulated unpaid claims was behind the withdrawal of the bill at the last minute late last year. The latest bill is almost identical to its two predecessors. Critics have argued that the scheme’s compensation cap is too low, court and tribunal rulings should be covered, managed investment schemes should be included and more historical non-payment of compensation should be covered. However, consumer groups and consumer legal centres have given up attacking the proposed scheme, on the basis that people waiting for compensation should get their money. Yesterday, one of the schemes strongest critics, Choice, issued a statement saying it “will significantly strengthen the protections that consumers enjoy when they deal with a financial firm”. “Thousands of Australians whose complaints have been paused at AFCA are waiting for the establishment of the compensation scheme so they can access redress.”