Parliament has passed legislation for the Compensation Scheme of Last Resort (CSLR), a Hayne royal commission-backed reform to provide financial redress for consumers. 

The CSLR bill secured passage in the Senate last week, having already cleared the House of Representatives in March. 

Financial Services Minister Stephen Jones says in a LinkedIn post the scheme will “provide over $230 million for over 2000 potential victims” of financial misconduct. 

“This is one of the last recommendations of the [Hayne] royal commission and will go a long way in helping victims,” he said. 

The CSLR will facilitate compensation of up to $150,000 to consumers who have an unpaid determination from the Australian Financial Complaints Authority (AFCA) including personal financial advice provided to relevant retail clients on relevant products. 

Funeral insurance and insurance arranged through a broker are outside the scope of the CSLR. 

Mr Jones says consumers will be able to lodge claims for compensation from April next year, with the first compensation payments to follow shortly thereafter. 

“To ensure the CSLR can commence as soon as possible, the Government will fund the costs to establish the body that will operate the CSLR, including funding the costs of the first levy period through to the end of the 2023/24 financial year,” he said. 

After 2023/24 the last resort compensation scheme will then be funded through industry levies. 

AFCA says with the passage of the CSLR it will now begin reviewing the status of complaints that have been put on hold because they involved insolvent firms. 

“We are pleased for those people who will be eligible to lodge a claim with the CSLR, as set out by the legislation,” AFCA said. 

“As an independent and impartial ombudsmen service, AFCA will now review the status of complaints it has had on pause because of firm insolvency. 

“There are nearly 5000 complaints currently on pause at AFCA, so this review will take some time to complete.” 

Since April 2020 AFCA has paused complaints against insolvent financial firms while awaiting detail of the scope and timing of a CSLR.