The total cost for unpaid compensation to consumers to be paid by large banking and insurance groups before the start of the compensation scheme of last resort (CSLR) later this year has been estimated at $241 million.
The figure relates to unpaid compensation stemming from determinations made by the Australian Financial Complaints Authority (AFCA) in response to financial misconduct complaints lodged between 1 November 2018 and 7 September 2022 and was released by the board of the scheme.
The board stated the figure was an estimate based on the work of two actuarial consultancies and falls within the $250 million cap for compensation set out in the legislation for the CSLR, but still needs to be approved by government.
“The legislation provides federal parliament with the opportunity to object to this estimate through a disallowance process,” it said.
“CSLR Ltd [the operator of the scheme] has registered the legislative instrument for the estimate with the Federal Register of Legislation.
“Once 15 parliamentary sitting days has elapsed, the Australian Securities and Investments Commission will determine the levy for the relevant financial firms and collect the levy on behalf of the federal government.”
The board added the payment of this initial establishing levy will come from the 10 largest banking and insurance groups determined by income reported to the ATO for 2021/22 and will be used to pay the pre-CSLR backlog of compensation claims up to 7 September 2022.
Claims from that date will be funded by annual levies to be paid by the government to the end of the 2024 financial year and by industry after that date, and compensation of up to $150,000 will be available to victims of financial misconduct where an AFCA determination has been made in their favour.
