Consumer group Choice wants the Federal Government to get on and pass laws to establish a compensation scheme of last resort (CSLR).

The Federal Government committed to introducing such a scheme into Parliament by Wednesday last week after a six-month extension of an earlier deadline due to COVID-19. The new deadline passed without the legislation being introduced.

The scheme would be industry-funded to compensate people when an ombudsman or court decision is made in a consumer’s favour but the financial institution is unable to pay. Choice wants the scheme to handle complaints backdated to November 2018.

Australian Financial Complaints Authority Chief Ombudsman David Locke has previously said a CSLR is “an important backstop that ensures people who have been the victims of misconduct and lost out through no fault of their own can be compensated when the financial firm is unable to pay”.

Choice wants the reform to be made a top priority for the first week that Parliament returns to work in August.

“Some 28 months since the release of the Financial Services Royal Commission’s final report, banking and financial advice victims are still waiting on one of its key recommendations - establishment of a compensation scheme,” Choice CEO Alan Kirkland said.

He says some families are waiting on hundreds of thousands of dollars of compensation that can’t be paid until the scheme is up and running, adding to the financial and emotional hardship suffered.

Australia’s existing Financial Claims Scheme provides compensation for insurance policyholders in the event an insurer fails. The CSLR would exclude any awarded amounts that are covered by that scheme and only pay the residual part of the determination solely within AFCA’s jurisdiction.