The Compensation Scheme of Last Resort (CSLR), created on the advice of the Ramsey Review as well as the Banking Royal Commission, has made its first payments, totalling over $360,000 to four claimants who suffered financial services misconduct.
CSLR Chief Executive, David Berry, said three of the claimants lived in suburban Sydney (Sutherland Shire; Northern Beaches and the Hills District), with the fourth residing on Brisbane’s western outskirts.
“Whilst the financial services industry works toward the betterment of their clients it’s unfortunate that there are a small few who take advantage of the trust bestowed on them. Ensuring some basic consumer protections works to lift trust in the financial services industry and the professions that support it.
“This crucial safety net for victims of financial services misconduct is now in place and those who have experienced financial loss through no fault of their own are being compensated.
“This really is a compensation scheme of last resort - these first four claimants had exhausted all other avenues and waited up to five years for a resolution.
“The CSLR claims team has been moved by the joy expressed by the scheme’s first claimants, some of whom were in quite desperate financial straits,” Mr Berry said.
The CSLR provides up to $150,000 in compensation to eligible consumers who have experienced misconduct by a financial firm and where the firm has not made recompense generally due to insolvency.
To be eligible for compensation, claimants must have experienced financial misconduct – as determined by the financial services sector ombudsman, the Australian Financial Complaints Authority (AFCA) – related to one or more of the financial products and services covered under the scheme.
“The scheme is an important part of Australia's consumer protection framework and aims to alleviate the distress of consumers when other avenues for redress are unavailable,” Mr Berry said.
“In turn, its existence will support confidence in the financial services sector.”
One of the first four payouts was over $50,000 to a couple from Queensland who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances.
A couple from Sydney’s south received about $145,000 following inappropriate personal financial advice provided by their financial planner relating to a self-managed super fund.
Another couple from Sydney’s Hills District was paid $150,000 in compensation after receiving superannuation advice., AFCA ruled that the advice was not tailored to reflect the couple’s circumstances or goals. The risks were also poorly explained to them, and the advice failed to consider alternatives.
A man from Sydney’s Northern Beaches received just under $17,000 in compensation after taking out a large loan on the advice of his financial adviser to invest in a scheme he was told had “guaranteed returns”.
CEO David Berry, also said it was important to acknowledge the financial support that industry was providing to the compensation scheme, through the levies on the sub-sectors covered in the legislation.
“Industry contributions ensure the scheme will both compensate eligible claimants but also encourage industry to back stronger standards, which enhances confidence and trust in the financial services sector,” David said.
“It is important to note that the vast majority of people in the financial services industry act ethically and in the best interests of their clients.
“The CSLR is a genuine last resort for misconduct only, not for poor performing investments or people who ignore good advice and take undue investment risks.”
CSLR levies will be collected from credit intermediaries, credit providers, licensees providing financial advice, and securities dealers. The levies are calculated by the Australian Securities and Investments Commission (ASIC) in accordance with federal legislation. The CSLR is managed independently and operates under parliamentary legislation.
About us:
About the Compensation Scheme of Last Resort
The Compensation Scheme of Last Resort (CSLR) is an industry-funded scheme offering protection to individuals harmed by the actions of financial institutions. It ensures that eligible individuals, following a determination awarding compensation from the Australian Financial Complaints Authority (AFCA), receive compensation of up to $150,000.
The CSLR's primary objective is to provide redress to claimants who have secured a favourable determination from AFCA yet have not received compensation from the financial firm generally due to insolvency.
The CSLR is managed independently and operates under parliamentary legislation. It is a vital part of Australia’s financial ecosystem, stepping in to provide relief to victims of financial misconduct, who may otherwise struggle to obtain compensation.
For more information, visit: https://www.cslr.org.au
Contact details:
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Benjamin Haslem at 0408 887 742