The Australian Financial Complaints Authority (AFCA) has signed a memorandum of understanding (MoU) with the Compensation Scheme of Last Resort (CSLR) as to how they will support an efficient financial services sector via the scheme.
This reflects the parties’ intention to “maintain a proactive, open and collaborative relationship to effectively perform their respective functions”. It also acknowledges the importance of consultation and co-operation in their respective responsibilities and governs the administrative arrangements.
The role of the CSLR is to provide compensation to eligible consumers, where the consumer has a determination issued by AFCA as the operator of the AFCA scheme, the financial firm has not paid the consumer in full in accordance with the determination, and the consumer has otherwise been unable to recover the compensation.
Meanwhile, AFCA is responsible for assisting consumers and small businesses to resolve their complaints with their financial firms. It does this by acting as an independent external dispute resolution scheme for certain complaints relating to financial services.
AFCA chief executive David Locke said: “The CSLR and AFCA have clearly defined and distinct roles governed by our respective legislation and rules. Consultation and co-operation will be important in effectively discharging our responsibilities.”
David Berry, CEO of the CSLR, said: “For the CSLR to support victims of financial misconduct, it is vital we have clear and transparent procedures in place with AFCA to support effective and efficient outcomes.”
The MoU can be terminated by either party with no less than 30 days written notice.
The CSLR came into force on 2 April 2024 and the scheme’s first levy period of $4.8 million is expected to fund CSLR claims and costs from 2 April to 30 June 2024 with estimates that CSLR will pay 11 claims during this initial period, one of which relates to Dixon Advisory.
Following this, the bulk of the claims will paid by the second levy period of $24.1 million that covers 1 July 2024 to 30 June 2025. Modelling suggests 129 claims will be paid in this period, 86 of which relate to Dixon Advisory.
Overall, there have been almost 2,000 complaints received relating to Dixon Advisory that the AFCA said is the largest volume of complaints it has received about a single operator in its five years of operation.
The CSLR noted the majority of Dixon Advisory claims will be funded by a levy of $241 million from the top 10 banking and insurers.
