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With stronger protections for consumers who have suffered financial misconduct passed through Parliament, the MFAA wants to ensure it remains ‘fit for purpose’.
The Mortgage & Finance Association of Australia (MFAA) has called for a comprehensive review of the recently passed Compensation Scheme of Last Resort (CSLR) within three years of its implementation to ensure it remains effective in providing adequate consumer protection against financial misconduct.
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The MFAA’s head of policy and legal, Naveen Ahluwalia, applauded the government for implementing the CSLR, emphasising its significance in granting victims of financial misconduct access to compensation after exhausting all other avenues of dispute resolution.
The Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023 passed both houses of Parliament last week (22 June) after Senate pushed it through.
The move will ensure victims of financial misconduct can have access to redress and compensation.
Ms Ahluwalia said that consumer protection is of “paramount importance to the mortgage and finance broking industry”, and the MFAA supports robust measures to safeguard consumers’ interests.
“MFAA has consistently advocated that the quantum of levies must be directly proportionate to the risk of consumer harm posed by our industry and balanced with the impact of regulatory costs on our small business members.
“We believe the Government has struck the right balance in funding the cost to establish the CSLR and funding the cost of the first levy period.
“We expect industry to receive its first levy notice in the 2024–25 financial year.”
Furthermore, the MFAA has expressed confidence that the financial burden on broking businesses will be relatively low due to the industry’s low level of complaints and determinations.
To ensure the ongoing effectiveness of the CSLR, the MFAA has urged the government to conduct a statutory review of the scheme within three years of its commencement.
The review would assess whether the CSLR is functioning as intended and meeting its intended purpose of protecting consumers against financial misconduct.
Under the new legislation, the government will bear the costs of establishing the body responsible for operating the CSLR. This includes funding the initial levy period until the end of the 2023–24 financial year. Subsequently, the scheme will be funded by the industry.
According to Minister for Financial Services Stephen Jones, there are approximately 2,000 cases pending with AFCA awaiting the implementation of the CSLR, while others continue to wait for their rightful redress.
Under the scheme, consumers may receive compensation of up to $150,000, encompassing various financial products and services.
[Related: MFAA sets out wishes for CSLR regime]
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