A compensation scheme of last resort should be established for consumers, the Financial Ombudsman Service (FOS) has told a government review.

The call – the latest in a long-running campaign for the initiative – is contained in a submission to the review of the financial system’s external dispute resolution (EDR) and complaints network.

“The lack of a compensation mechanism and the continued problem of unpaid determinations directly undermines the effectiveness of current… arrangements, and should be fixed as an urgent matter,” FOS says.

“Our proposals are designed to solve the problem of unpaid FOS determinations.”

FOS says 32 financial service providers are unwilling or unable to comply with 137 determinations it made from January 2010 to June 30 this year, leaving 194 consumers waiting for compensation.

The value of these determinations was about $12.61 million plus interest at June 30.

“We regard implementation of such a scheme as essential for the overall effectiveness of EDR for the financial sector,” the submission says.

It suggests other ways to improve dispute resolution, including expanding the ombudsman’s small business jurisdiction, enhancing its powers and reviewing monetary limits for the general consumer jurisdiction.

Ian Ramsay, Professor of Commercial Law at the University of Melbourne and member of the Law Council of Australia, chairs the independent panel conducting the review.

A final report will be issued by the end of March next year.