The Compensation Scheme of Last Resort (CSLR) has begun operations, ending a near-seven-year process to launch the body.

The scheme was suggested in the 2017 Ramsay review and later backed by the Hayne royal commission, with the aim to provide compensation for complainants who have not been paid following Australian Financial Complaints Authority determinations.

But the Federal Parliament only passed legislation for the CSLR last June after it was subjected to Senate committee and Treasury reviews.  

The scheme will offer up to $150,000 compensation for matters relating to personal financial advice, credit intermediation, securities dealing and credit provision, primarily covering for businesses that have gone bankrupt or insolvent.  

Financial Services Minister Stephen Jones says he is proud to establish the scheme as one of the final and lasting recommendations from the Hayne inquiry. “The compensation scheme of last resort will strengthen consumer trust and confidence in Australia’s financial system,” he said. “This scheme will give victims an avenue for redress when things go wrong.” 

The Federal Government has allocated $4.8 million for the scheme’s initial operation, from April 2 to June 30. It then plans to recover an estimated $24.1 million from major financial services groups between July 1 and June 30 next year to sustain operations.  

“By having contributions from industry, the scheme will not only be able to compensate eligible claimants but will also encourage industry to support strong standards, enhancing trust and confidence in the financial services sector,” CSLR CEO David Berry said.

Mr Berry, who is on the CSLR board alongside Chair Jo-Anne Bloch and non-executive directors Delia Rickard and Kevin O’Sullivan, says the team aims to deliver “a scheme that operates efficiently, economically and effectively. Our task is to ensure that those who have experienced financial loss through no fault of their own receive recompense.”