CANBERRA, Australia — Australian customers owed compensation for financial services rip-offs are expected to benefit from laws earmarked to come into force early next year.
The federal government on July 16 released draft laws for comment stemming from the royal banking commission, which exposed misconduct and shoddy practices in the sector.
Treasurer Josh Frydenberg said the compensation scheme of last resort would enable payments to people who have received a determination for compensation from the Australian Financial Complaints Authority, which remains unpaid.
The scheme would pay compensation consistent with the terms of the Australian Financial Complaints Authority determination, including for any direct financial loss, indirect financial loss, non-financial loss, interest payments, and any legal or professional costs awarded by Australian Financial Complaints Authority, up to a proposed AU$150,000 ($111,261.7) cap.
Any decision would not be reviewable by the Administrative Appeals Tribunal.
The scheme, operated by a public company, is proposed to be funded by a levy on the industry, including credit providers, credit intermediaries, financial advisers, and securities dealers.
The Australian Securities and Investments Commission will have the power to suspend or cancel the financial service license or credit license in the case of the scheme compensating a client.
“This will ensure that licensees meet their obligations in relation to Australian Financial Complaints Authority determinations and do not consider the Compensation Scheme of Last Resort as an opportunity to avoid meeting those obligations,” said the government’s proposal paper.
As well, the government plans to extend the Banking Executive Accountability Regime to a wider range of firms beyond banks.
“Extending it to all entities regulated by the Australian Prudential Regulation Authority recognized “decisions taken by directors and the most senior executives of financial institutions are significant for millions of Australians and the Australian economy,” said Frydenberg.
In a separate report, Australian Securities and Investments Commission revealed financial product issuers had ended 96 percent of grandfathered conflicted remuneration arrangements by the end of last year.
“Australian Securities and Investments Commission recognized the extraordinary demands that the Covid‑19 pandemic placed on the community and worked with the Government and the Council of Financial Regulators to support businesses and individuals through the challenges they were experiencing,” states the report.
“We, therefore, limited the regulatory activity that entities were required to respond to as much as possible and worked with the financial services industry to identify areas where we could provide support.”
Around AU$266.7 million ($168.2 million) was rebated to consumers from July 1, 2019, to Dec. 31 last year, with a further AU$24.4 million ($18.1 million) rebated to consumers 2021.
(Edited by Vaibhav Pawar and Saptak Datta)
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