The long-awaited Compensation Scheme of Last Resort has started operating. Under the scheme, a payment of up to $150,000 can be made to consumers who have experienced misconduct and the business liable to pay compensation does not do so, usually because it has closed its doors.
The victims, who were mainly older investors and retirees, were left with nowhere to turn, except, in some cases, through expensive legal action. Consumers can then apply for compensation from the CSLR which, in effect, stands in for the company that no longer exists or cannot make the payment. Consumers are expected to exhaust a business’s internal complaint resolution processes before lodging a complaint with AFCA, which is free to access.Consumer groups had called for the compensation scheme to cover all financial products and services that fall under AFCA’s jurisdiction.
A likely outcome of the review will be an increase in the threshold to be designated a “wholesale” investor. Currently, an investor can be designated as a wholesale investor by a qualified accountant if the investor has at least $2.5 million in assets.
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