On 22 June 2023, the Australian Parliament passed legislation establishing a Compensation Scheme of Last Resort (CSLR).
The CSLR will strengthen trust and confidence in the dispute resolution framework for financial services by ensuring the victims of financial misconduct have access to redress.
The Federal Government’s intention is that consumers will be able to lodge claims for compensation from April 2024, with the first compensation payments to follow shortly afterwards.
Now that legislation establishing a CSLR has been passed, we will be putting the people and processes in place to ensure the smooth running of the scheme.
CSLR will not be in operation until April 2024. We look forward to being able to assist those eligible to access the CSLR scheme at that time.
To support the creation of the organisational structure and application for Ministerial authorisation, the CSLR has a Transitional Board which will make way for an Ongoing Board – which will include the Chair to be appointed by the Minister.
The CSLR is a scheme designed to make payments on a last-resort basis to eligible consumers where determinations by the Australian Financial Complaints Authority (AFCA) for compensation remain unpaid in the financial sub-sectors specified in the legislation.
The CSLR will facilitate the payment of up to $150,000 in compensation to consumers who meet the eligibility criteria.
There will be no charge to consumers for access to the scheme.
The CSLR will be open to applications from consumers who have an unpaid determination from AFCA relating to:
However, other financial services will be outside the scope of the CSLR, such as:
You can read more about eligibility in the legislation here.
AFCA is Australia’s national financial ombudsman service. It considers complaints from consumers, including small businesses, in relation to banking and finance, insurance, investments and advice, and superannuation.
AFCA generally tries to help the consumer and financial firm resolve a complaint through informal methods, such as conciliation. However, it can also make decisions, known as determinations, after an investigation of the facts.
AFCA provides information on its role in relation to the CSLR on its Current Matter page.
The CSLR’s job will be to pay compensation that has been awarded to a consumer in an AFCA determination which remains unpaid, up to a limit of $150,000. A number of steps need to have occurred before application can be made to the CSLR:
Step 1 – Where possible, the consumer has first lodged a complaint with the financial firm and gone through its internal dispute resolution process.
Step 2 – The consumer has lodged a complaint with AFCA against the financial firm.
Step 3 – The consumer has received a determination from AFCA awarding compensation.
Step 4 – The consumer has advised AFCA that the compensation ordered in the determination has not been paid.
Step 5 – AFCA has taken appropriate steps to require payment but the amount still has not been paid.
The consumer can then make an application for compensation to the CSLR:
Step 6 – The CSLR will assess whether the unpaid determination is eligible for compensation under the CSLR’s legislation.
Step 7 – If there is no other avenue for compensation, the CSLR will make a payment to the consumer.
It is important to note that the CSLR cannot review the merits or facts of a dispute between the consumer and financial firm. Only AFCA can consider complaints that fall within its jurisdiction and issue a final decision awarding compensation to a consumer.
Now that legislation establishing a CSLR has been passed, we will spend the coming months putting in place the people and processes to ensure the smooth running of the scheme.
CSLR will not be in operation until April 2024 and cannot start receiving claims from consumers before then.
CSLR will publish its process and expected timeframes for handling claims closer to this date.
CSLR is committed to sharing information about our work with the public and improving awareness about our service.
View the latest news here.
You do not need to do anything. With the passing of the legislation, AFCA is now reviewing the status of complaints it had on pause while awaiting the detail of the scope and timing of the CSLR.
AFCA will contact complainants as it progresses that work. We understand that may take some time. You can read more on AFCA’s website.
Remember, CSLR will not be in operation until April 2024 and cannot start receiving claims from consumers before then. Come back to this site at that time.
We thank you for your continued patience as we go about our work to prepare the CSLR to accept applications.
We acknowledge that many people have suffered significant financial losses and that this has been a stressful time.
We also acknowledge that some people will be very disappointed that they are not eligible for the CSLR, or that they will not be fully compensated for their losses.
The design of the CSLR legislation is a matter of government policy. You can see the legislation here.