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Unfortunately, it’s not uncommon to read about consumers who have lost money due to the financial misconduct of financial service providers. While those providers may be required to pay compensation, many victims never receive it because the firm responsible is unable to pay, often due to insolvency.
This is why the Compensation Scheme of Last Resort (CSLR) was established by the Australian Government, commencing operations in April 2024.
The CSLR supports consumers who have been awarded compensation by the Australian Financial Complaints Authority (AFCA) but never receive that payment from the relevant financial services provider. In effect, it acts as a safety net for consumers harmed by financial misconduct.
What is covered by the CSLR?
The CSLR covers consumers who suffer financial loss after dealing with licensed financial firms that provide certain products or services. It does not apply to every financial service or type of misconduct.
The products and services covered by the CSLR include:
- Personal financial advice: For example, where inappropriate advice from a financial planner causes financial loss.
- Dealing in securities for retail clients: For example, where a stockbroker buys shares on your behalf and this results in financial loss.
- Providing credit: For example, where a credit provider gives you regulated credit that you can’t afford.
- Arranging credit: For example, where a mortgage broker inappropriately arranges finance for you.
Who is eligible for a payment under the CSLR?
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