The Compensation Scheme of Last Resort has made its first payments, totalling over $360,000, to four claimants who suffered financial services misconduct.
These four claims related to advice regarding a mortgage, a self-managed super fund, superannuation and a loan.
A statement from the organisation says the payments made were:
- Over $50,000 to a couple from Queensland who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances.
- A couple from Sydney’s south received about $145,000 following inappropriate personal financial advice provided by their financial planner relating to a self-managed super fund.
- Another couple from Sydney’s Hills District was paid $150,000 in compensation after receiving superannuation advice. AFCA ruled that the advice was not tailored to reflect the couple’s circumstances or goals. The risks were also poorly explained to them, and the advice failed to consider alternatives.
- A man from Sydney’s Northern Beaches received just under $17,000 in compensation after taking out a large loan on the advice of his financial adviser to invest in a scheme he was told had “guaranteed returns”.
CSLR Chief Executive, David Berry, these first four claimants “…had exhausted all other avenues and waited up to five years for a resolution.
“The CSLR claims team has been moved by the joy expressed by the scheme’s first claimants, some of whom were in quite desperate financial straits,” he states.
The CSLR provides up to $150,000 in compensation to eligible consumers who have experienced misconduct by a financial firm and where the firm has not made recompense generally due to insolvency.
To be eligible for compensation, claimants must have experienced financial misconduct – as determined by the financial services sector ombudsman, AFCA – related to one or more of the financial products and services covered under the scheme.
Berry says the scheme is an important part of Australia’s consumer protection framework and aims to alleviate the distress of consumers when other avenues for redress are unavailable.
“In turn, its existence will support confidence in the financial services sector.”
Berry also notes it’s important to acknowledge the financial support that industry was providing to the compensation scheme, through the levies on the sub-sectors covered in the legislation (see:CSLR Costs Spiralling Out of Control).
“Industry contributions ensure the scheme will both compensate eligible claimants but also encourage industry to back stronger standards, which enhances confidence and trust in the financial services sector,” he says.
“It is important to note that the vast majority of people in the financial services industry act ethically and in the best interests of their clients.”
CSLR levies will be collected from credit intermediaries, credit providers, licensees providing financial advice, and securities dealers.
