The Australian Financial Complaints Authority (AFCA) has reaffirmed its support for a compensation scheme of last resort (CSLR) to protect consumers from losses from misconduct by financial services organisations.
The declaration was made in AFCA’s submission to the federal government as part of the consultation process regarding the need for a CSLR and is consistent with the position of its predecessor consumer protection bodies.
“A compensation scheme of last resort is an important backstop that ensures that people who have been the victims of misconduct and lost out through no fault of their own can be compensated when the financial firm is unable to pay,” AFCA chief ombudsman David Locke said.
“Without this measure there is a significant gap that will cause considerable hardship to consumers who have done nothing wrong, who have suffered financial loss, taken appropriate action through AFCA, only for that outcome not to be honoured by the financial firm.”
According to Locke, restoring consumer confidence and trust in the financial services sector after the financial services royal commission findings can in some part be achieved through the establishment of a CSLR.
“This rebuilding of trust is in the interests of all financial services firms and all Australians,” he said.
“We look forward to working with the government and stakeholders to implement this important reform.”