A compensation scheme recommended by the banking royal commission is now operating. 

The Compensation Scheme of Last Resort (CSLR), a key initiative first proposed by the 2017 Ramsay Review and later endorsed by the banking royal commission, has officially commenced operations. 

The scheme aims to provide financial relief to consumers who have suffered due to the misconduct of financial services firms, particularly in cases where the firms have become insolvent and are unable to make reparations.

The CSLR offers compensation of up to $150,000 to eligible claimants, addressing a significant gap in the existing consumer protection landscape in Australia. 

It targets various cases, including those related to investment advice, stock and bond trading, and direct financial borrowing. 

The establishment of the scheme is expected to bolster consumer confidence in the financial sector by providing a dependable fallback for financial recovery.

Inaugural CSLR Chair Jo-Anne Bloch says the CSLR will function as a crucial safety net, ensuring that “large sums were not simply written off, with no second chances to recoup the losses”. 

David Berry, the CEO of the CSLR, acknowledged the financial support from the industry, which contributes to the scheme through levies, potentially reinforcing standards and trust within the sector.

Eligibility for the CSLR compensation involves a three-step process: lodging a complaint with the Australian Financial Complaints Authority (AFCA), completion of the AFCA complaint process with an awarded compensation, and the financial firm’s failure to pay the awarded compensation. 

Once these steps are completed, consumers can apply for compensation from the CSLR.

The CSLR operates under stringent legislative guidelines and is funded through industry levies collected by the Australian Securities and Investments Commission (ASIC) from credit intermediaries, financial advisors, and securities dealers.

For further details or to make a claim, eligible individuals are encouraged to visit the CSLR’s official website.