The government introduced a bill yesterday to establish a Financial Services Compensation Scheme of Last Resort, whose key features are the same as those of the heavily criticised (including by Labor) scheme proposed by the Coalition government.
Financial Services Compensation Scheme of Last Resort Levy Bill 2022 establishes a body that 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.
Specific products and services are those that financial institutions with an Australian financial services licences or an Australian credit licence are authorised to provide and where they are required to be AFCA members. Managed investment schemes are not covered.
The many critics of the Coalition bill complained that the compensation cap was too low, court and tribunal rulings should have been covered, managed investment schemes should have been included and that some of the historical misconduct examined by the Hayne royal commission should have been covered.
None of these issues have been addressed in the government’s bill.
In February, Labor members of the Senate Economics Legislation Committee wrote a dissenting report when the committee reviewed the Coalition bill, saying its shortcomings needed to be addressed.
The Labor senators said they were concerned about the narrow focus of the proposed scheme, particularly the decision to exclude managed investment schemes. They said Labor would encourage the then-government to make changes.
In June, Assistant Treasurer and Minster for Financial Services Stephen Jones told the Australian Financial Review that he wanted to pass “a broader version of the CSLR than that proposed by the Coalition” and that he was consulting about the best way to bring in additional sectors such as managed investment schemes.