Consumer groups have called for the Australian Financial Complaints Authority (AFCA) compensation cap to be raised to equal the monetary ceiling on matters it can handle, while also proposing scrapping the non-financial compensation limit.

A submission to a Treasury review of AFCA says the general compensation cap, which sits at $542,500, should be increased in stages to the monetary limit, which has risen slightly to $1.085 million following a January 1 adjustment.

The consumer groups say the Government has previously accepted a Ramsay Review recommendation proposing the change, unless there has been a substantial lessening of competition, which they say has not been observed.

The general compensation cap applies to financial sector areas including insurance, but not broking which has a $271,500 compensation limit except where the claim relates to a life insurance policy.

Consumer groups say the “very low” $5400 cap on non-financial and indirect financial loss “is in stark contrast” to available compensation for privacy and discrimination complaints in other forums, and it should be abandoned or substantially raised.

The Office of the Australian Information Commission has no limit on non-financial loss and the Queensland Civil and Administration Tribunal can award up to $100,000 for loss or damage, including injury to feelings or humiliation, in privacy complaints, while there is no limit for discrimination complaints in Queensland.

“Due to these differing limits, there is a marked disparity in potential financial outcomes for otherwise similar disputes, which may encourage forum shopping,” the submission says.

Consumer groups also propose increasing monetary limits for complaints from strata schemes or owners’ corporations given a single claim may relate to all members and be caused by one event.

The submission represents the views of 13 organisations including Consumer Action Law Centre, Financial Rights Legal Centre, Choice, WEstjustice, Financial Counselling Australia and Victorian Aboriginal Legal Service.