Treasury compensation scheme consultation opens, FAR legislation finalised

12 September 2022

Treasury has opened consultation over its exposure draft regulations for the planned compensation scheme of last resort, an industry-funded program to provide monetary redress for eligible unpaid Australian Financial Complaints Authority determinations.

The consultation follows the introduction of the legislation for the scheme in parliament last week. Legislation for the measure – recommended by the Ramsay Review in 2017 and later backed by the Hayne royal commission – was introduced in October last year by the Morrison government but passage was put on hold after parliament was dissolved for the May federal election.

Financial Services Minister Stephen Jones says the scheme will facilitate the payment of compensation of up to $150,000 to eligible consumers who have a determination from AFCA relating to personal financial advice, credit intermediation, securities dealing and credit provision which remains unpaid.

The Government will contribute towards the costs of the scheme in its first year of operation, which is proposed to commence on July 1 next year.

“The scheme will be fully industry funded through a levy on relevant financial service and credit licensees in the subsequent years of the scheme’s operation,” Mr Jones said.

Mr Jones also announced the Albanese Government has finalised the legislation to implement recommendations to extend the Banking Executive Accountability Regime to all Australian Prudential Regulation Authority-regulated entities and to provide for joint administration between the prudential regulator and Australian Securities and Investments Commission.

The new Financial Accountability Regime (FAR) imposes a “strengthened responsibility and accountability” framework that will ensure that the directors and most senior and influential executives of financial institutions will be held accountable for their decisions and conduct, Mr Jones said.

“The FAR imposes heightened accountability obligations and ensures that where these obligations are not met, appropriate consequences will follow, including civil penalties for financial institutions and disqualification of senior executives as accountable persons.”

Closing date for submissions to the Treasury compensation scheme consultation is October 7.

Click here for the consultation paper.