The Compensation Scheme of Last Resort (CSLR) was established to ensure people aren't left with anything when a financial firm goes bust. Financial Rights Legal Centre is disappointed that reforms to the CSLR announced yesterday will reduce payments to victims.
By limiting the payment to only initial losses the scheme now operates such that people miss out on investment earnings, the loss of insurance cover that cannot be replaced, and costs people incur trying to undo inappropriate financial arrangements.
“If the Government makes this change, it will mean many Australians who have lost it all will be tens of thousands of dollars worse off” said Drew MacRae, Principal, Policy Development at Financial Rights Legal Centre.
“Removing the ‘but for’ compensation element undermines long-established common law principles that innocent victims be placed in the position they would have been in ‘but for’ the harm taking place. These changes bake in unfairness that will further chip away at consumer rights over time.”
Other reforms announced yesterday will better address consumer harm, in particular the announcement that the government will be tackling the scourge of lead generation in superannuation. While it falls short of the outright ban consumer groups sought, the reforms should help prevent the mis-selling and poor conduct observed to date.
Background
Financial Rights was part of a consumer coalition who put in a joint submission that called on the government to strengthen the CSLR.
