CSLR director Kevin O'Sullivan
Large banks and insurers will pay an initial levy of A$241 million for historical claims to be handled by the new Compensation Scheme of Last Resort.
The CSLR is scheduled to start operating in April. Last week, the transitional board issued an estimate for the funds it will need to meet compensation claims in relation to complaints that were lodged with the Australian Financial Complaints Authority between November 2018 and September 2022.
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. Compensation is capped at $150,000.
Compensation under the CSLR is available for eligible complaints made to AFCA since it 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 $241 million figure was determined by actuarial consultant Finity Consulting. The figure was reviewed by a second actuary, Taylor Fry.
The levy is open to parliamentary review and will be finally determined by ASIC.
The CSLR transitional board has also announced the appointment of former UniSuper chief executive Kevin O’Sullivan as the second founding member of the board that will take over when the CSLR commences.
He will join Delia Rickard, a former ACCC deputy chair who has also been appointed to the board.
O’Sullivan has also worked as a director in the actuarial and business consulting practice of Russell Investment Group.
The chair, a government appointee, has yet to be named.
In other financial complaints news, AFCA reported that it received 102,790 complaints last year – a 23 per cent increase on 2022.
Scam-related complaints doubled and complaints involving financial hardship also rose sharply.
AFCA chef executive David Locke said the volume of complaints is increasing at an “unsustainable rate” and financial firms needed to better support customers by addressing complaints quickly and efficiently in-house.
Locke said: “We believe many firms could be doing a better job of handling complaints within their own internal complaints processes, so only the most complex cases reach AFCA – which is the role we are meant to play.
“The volume of complaints reaching us is putting unnecessary pressure on the external dispute resolution system and inevitably causing further delays for consumers.”
Consumers received $304 million in refunds and compensation last year, after going though AFCA. This was up 38 per cent on the previous year.