The Compensation Scheme of Last Resort (CSLR) has made its first payments totalling $360,000, including a payment close to the maximum allowed under the scheme to a couple who received inappropriate advice regarding an SMSF.
The CSLR stated it had paid $145,000 to a couple from southern Sydney who had received inappropriate advice from their financial planner relating to an SMSF. Another couple in the west of that city received $150,000 in compensation in relation to superannuation advice the Australian Financial Complaints Authority (AFCA) ruled was not tailored to reflect their circumstances or goals and in which the risks were poorly explained and it failed to consider alternatives.
Two further compensation payouts were made in regards to borrowings, with a man from Sydney’s northern beaches receiving just under $17,000 after taking out a loan on the advice of a financial adviser to invest in a scheme with ‘guaranteed returns’, while a further $50,000 was paid to a Queensland couple who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances.
CSLR chief executive David Berry said the payments would alleviate the distress of consumers who have experienced financial loss through no fault of their own and when other avenues for redress were unavailable.
“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,” Berry said.
“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.”
He added the financial support to the compensation scheme provided by the financial services sector through levies was important for redressing losses and improving consumer outcomes.
“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,” he said.
The CSLR, which began operations on 2 April, can provide compensation up to a maximum of $150,000 to consumers where AFCA has ruled they have experienced misconduct by a financial firm in relation to products or services covered by the scheme and where the firm has not made recompense, generally due to insolvency.
