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CSLR introduced to Parliament

by James Mitchell11 minute read

The implementation of a Compensation Scheme of Last Resort (CSLR) has moved closer after the bill was reintroduced to Parliament this month.

The measure was previously part of the Credit Act but was removed at the end of last year. It had since been reintroduced to the House of Representatives under the Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023.

The CSLR was an ongoing process that had been in discussion since 2016 when it was first raised by the Ramsay Review regarding the establishment of a financial system dispute resolution framework.

The scheme’s establishment and initial operation would be funded by the Commonwealth government and a levy would apply for its ongoing operation. The second levy period, payable by the industry, would commence from 1 July 2024.


The scheme levy cap would be set at $250 million per levy period with a sub-sector cap of $20 million per levy period, although it was noted this could be exceeded.

Australia’s 10 largest banking and insurance groups (excluding health insurers and superannuation groups) were required to pay a one-off levy to fund the backlog of accumulated unpaid claims (and AFCA’s unpaid fees relating to those claims) relating to complaints made to AFCA between 1 November 2018 and 7 September 2022.

Compensation payments could be made to eligible consumers after the commencement of the first levy period, the government said. It applied to credit activity as a credit provider, providing financial product advice that was personal advice to a retail client and dealing in securities for a person as a retail client.

It said: “The CSLR is intended to support confidence in the financial system’s external dispute resolution framework. The scheme provides for compensation to be paid to a consumer where the determination issued by AFCA remains unpaid and the determination relates to a financial product or service within the scope of the scheme.

“The Commonwealth will fund the establishment of the scheme and part of its initial operation. A levy will be imposed on parts of the financial services industry to fund the scheme’s ongoing operation.

“A consumer who has not been paid in accordance with a relevant AFCA determination may apply to the operator of the CSLR for payment. If the eligibility criteria are met, the operator of the CSLR must compensate the consumer, up to $150,000.”

If an AFCA determination was greater than $150,000, the excess was not compensable under the CSLR and would instead remain a debt owed by the relevant entity to the consumer that could be pursued by the consumer via alternative routes.

Chief executive of the Financial Services Council (FSC), Blake Briggs, said: “The CSLR will establish an industry-funded scheme to protect consumers who have incurred losses while not excessively burdening customers and well-run organisations that have done nothing wrong with the costs of the scheme.

“The aim is for the CSLR to be genuinely last resort through effective enforcement of existing laws to minimise the potential cost of the scheme to consumers and industry.”

[Related: Govt moves on royal commission reforms]

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