"Some 28 months since the release of the Financial Services Royal Commission's final report, banking and financial advice victims are still waiting on one of its key recommendations - establishment of a compensation scheme," says CHOICE CEO Alan Kirkland.
The Federal Government had committed to introduce the Compensation Scheme of Last Resort (CSLR) to the House of Representatives by 30 December 2020. That commitment was delayed until 30 June 2021 due to COVID-19. That deadline has now passed without the legislation being introduced.
"When the Government delayed Royal Commission reforms by six months due to COVID-19, we saw this as reasonable but with Parliament back to normal operations, people who have lost money due to financial misconduct should not be waiting any longer."
The Compensation Scheme of Last Resort reform would establish an industry-funded scheme that would compensate people if an ombudsman or court decision is made in a consumer's favour and the financial institution is unable to pay. It would cover decisions on compensation dating back to November 2018.
"Across Australia, victims of misconduct in the financial system continue to be left out of pocket. Some families are waiting on hundreds of thousands of dollars of compensation that can't be paid until the scheme is up and running. These delays only add to the financial and emotional hardship suffered by these people."
"It's also critical that the Government moves to introduce the Financial Accountability Regime, to protect people from misconduct in the future."
The Financial Accountability Regime reform would hold finance executives personally accountable for misconduct. Financial executives would be subject to:
- new fines of up to $1,050,000;
- deferred remuneration obligations; and
- disqualification from operating as an accountable executive.
Legislation on the FAR was also due to be introduced by 30 June 2021.
"The delay in establishing the Financial Accountability Regime law sends a message to banking executives that misconduct will go unpunished. The Australian community expects strong enforcement and penalties for banking executives when they break the law. That requires strong legislation, as recommended by Commissioner Hayne," says Mr Kirkland.
"We call upon the Treasurer to make these two reforms a priority for the first week that Parliament returns to work in August. Without them, wrongdoing by bank executives will continue to go unpunished, and people who have lost money due to misconduct will continue to go uncompensated."
Media contact: Katelyn Cameron, 0430 172 669, email@example.com
- On 4 February 2019, the Banking Royal Commission released 76 final recommendations to reform the financial system.
- The Federal Government committed to introduce the Compensation Scheme of Last Resort and the Financial Accountability Regime into the House of Representatives by 30 December 2020.
- The Government delayed these reforms another six months until 30 June 2020 due to COVID-19.