This bill became law on Jul 3rd, 2023.
Budget, tax & economy
Australia now has a backstop that pays consumers when a financial firm does not pay an Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. ruling that is already in the consumer's favour.
Unpaid Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. rulings left consumers who had already won complaints without compensation when financial firms did not pay. The bill establishes a Compensation Scheme of Last ResortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour. and levy framework that lets eligible consumers claim up to $150,000 and funds payments through industry levies.
Australia already had the Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. to rule on disputes, but the Ramsay reviewThe 2017 review that found the existing complaints system could still leave people unpaid after winning a case. in 2017 and the banking royal commission in 2019 found that consumers could still be left uncompensated when firms ignored determinations in their favour and existing redress arrangements failed. The 2023 bill answered that gap by creating a last-resort compensation scheme funded by industry levies, and later strain from large claims linked to the Shield and First Guardian collapses showed the new backstop was operating but financially exposed.
The main case against the bill is that the scheme could become expensive and unstable, forcing levies onto sectors and consumers who were not responsible for the failed firms and may never benefit from it. That concern was only limited during the 2023 debate, but it was later raised more sharply by industry groups and reporting on claim and levy blowouts as the scheme came under strain.
Stephen Jones MP introduced this bill. It passed on the voices.
Did it become law?
Yes
Became law 03 July 2023
Final passage
Passed without a counted vote
Members called out ‘aye’ or ‘no’ — no individual votes were recorded.
Passage speed
117 days
From introduction to the latest recorded parliamentary step
Meaning
Australia now has a backstop that pays consumers when a financial firm does not pay an Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. ruling that is already in the consumer's favour.
A person with an unpaid Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. determinationAFCA's formal decision on a complaint, which can order a firm to pay money or take another step. can apply for compensation, and if they qualify the scheme must pay up to $150,000.
The scheme covers unpaid rulings about personal financial advice to retail clients, credit activities, securities dealing, and credit provision.
The scheme must also cover unpaid Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. complaint fees when financial firms do not pay them, even if the consumer did not win the complaint.
If compensation costs for one part of the finance industry grow beyond its cap, the Minister can trigger a special levyAn extra levy the Minister can impose on part of the industry if normal funding for one area is not enough. on one or more industry sub-sectors to keep payments flowing.
The CSLR is intended to support confidence in the financial system’s external dispute resolution framework. The scheme provides for compensation to be paid to a consumer where a determination issued by AFCA remains unpaid and the determination relates to a financial product or service within the scope of the scheme. The Commonwealth will fund the establishment of the scheme and part of its initial operation. A levy will be imposed on parts of the financial services industry to fund the scheme’s ongoing operation.Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) explanatory memorandum
A consumer who has not been paid in accordance with a relevant AFCA determination may apply to the operator of the CSLR for payment. If the eligibility criteria are met, the operator of the CSLR must compensate the consumer, up to $150,000.Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) explanatory memorandum
Claimants may receive compensation of up to $150,000 where they have an unpaid AFCA determination in their favour for the following financial services or products: personal advice on relevant financial products to retail clients, credit intermediation, securities dealing and credit provision. The cap on claims helps maintain the ongoing financial sustainability of the scheme, whilst balancing the interests of consumers.Second reading speech
Where AFCA’s fees are not paid by the relevant entity (for whatever reason), the CSLR operator is required to pay to AFCA an amount equal to AFCA’s unpaid fees (calculated on a monthly basis). This applies in relation to all unpaid fees and charges for complaints within the scope of the CSLR, regardless of whether the complaint is determined in favour of the consumer or the relevant entity.[Item 3, sections 1069B and 1069C]Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) explanatory memorandum
provide for the imposition of a special levy for the levy period that applies to more than one sub-sector (not just the primary sub-sector) – the Minister may only do this if he or she is satisfied that it is necessary to do so due to the number and size of compensation payments required to be paid in the levy period and that this is the most effective way of enabling timely payment of compensation to those consumers.Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) explanatory memorandum
Context
Australia already had the Australian Financial Complaints AuthorityThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. to rule on disputes, but the Ramsay reviewThe 2017 review that found the existing complaints system could still leave people unpaid after winning a case. in 2017 and the banking royal commission in 2019 found that consumers could still be left uncompensated when firms ignored determinations in their favour and existing redress arrangements failed. The 2023 bill answered that gap by creating a last-resort compensation scheme funded by industry levies, and later strain from large claims linked to the Shield and First Guardian collapses showed the new backstop was operating but financially exposed.
Ramsay reviewThe 2017 review that found the existing complaints system could still leave people unpaid after winning a case. finds existing consumer redress is inadequate
The 2017 supplementary final report on external dispute resolutionA process where a consumer complaint is handled outside court by a body like AFCA. identified gaps in existing redress arrangements that left some consumers without compensation even after successful complaints.
Hansard ↗Banking royal commission recommends a compensation scheme of last resortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour.
The royal commission endorsed the Ramsay reviewThe 2017 review that found the existing complaints system could still leave people unpaid after winning a case.'s recommendations, giving national backing to a scheme that would pay consumers when financial firms failed to honour determinations.
Hansard ↗Government introduces the compensation scheme bill
The bill was introduced as part of a package to establish and fund a Compensation Scheme of Last ResortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour. for consumers with unpaid AFCAThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. determinations.
Parliamentary timeline ↗Parliament passes the bill
Both houses passed the bill in the same form, clearing the way for the new industry-funded backstop to become law.
Parliamentary timeline ↗Royal AssentThe final step that turns a passed bill into an Act of Parliament. makes the scheme law
Royal AssentThe final step that turns a passed bill into an Act of Parliament. completed the legislation that created the Compensation Scheme of Last ResortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour. and its levy framework.
Parliamentary timeline ↗Shield and First Guardian collapses drive a claims blowout
The Australian Financial Review reported that claims linked to the Shield and First Guardian collapses had pushed levy estimates sharply higher and raised doubts about the scheme's long-term sustainability.
Australian Financial Review ↗Legislative route
The bill was formally presented to the chamber and read a first time, which starts its parliamentary journey.
Introduced and read a first time
A minister or sponsoring member moved the second reading, opening the main debate on the bill's purpose and principles.
Second reading moved
The bill reached this recorded parliamentary step.
The bill reached this recorded parliamentary step.
Referred to Federation Chamber
The bill reached this recorded parliamentary step.
Second reading debate
The chamber agreed to the bill at second reading, meaning it accepted the bill in principle and allowed it to continue.
Second reading agreed to
The bill reached this recorded parliamentary step.
Reported from Federation Chamber
The chamber agreed to the bill at third reading, which completed passage through that chamber.
Third reading agreed to
The bill was formally presented to the chamber and read a first time, which starts its parliamentary journey.
Introduced and read a first time
A minister or sponsoring member moved the second reading, opening the main debate on the bill's purpose and principles.
Second reading moved
The chamber agreed to the bill at second reading, meaning it accepted the bill in principle and allowed it to continue.
Second reading agreed to
The chamber agreed to the bill at third reading, which completed passage through that chamber.
Third reading agreed to
Both houses passed the bill in the same form, completing parliamentary passage.
Finally passed both Houses
The Governor-General gave Royal AssentThe final step that turns a passed bill into an Act of Parliament., turning the bill into an Act.
Key criticism
The main case against the bill is that the scheme could become expensive and unstable, forcing levies onto sectors and consumers who were not responsible for the failed firms and may never benefit from it. That concern was only limited during the 2023 debate, but it was later raised more sharply by industry groups and reporting on claim and levy blowouts as the scheme came under strain.
No party represented in the debate opposed the bill, but cost and design concerns later became more serious.
Costs could blow out and spread beyond the firms at fault
Critics warned the scheme could outgrow its original design, with rising compensation costs leading to bigger levies and special levies on other parts of the financial system. The concern is that losses caused by failed advisers or funds would end up being spread across sectors whose customers may never use the scheme.
The scheme may pay claims too broadly
Banks and other industry voices later argued the scheme should be tightened so it does not compensate wealthy investors or cover losses in ways that go beyond a narrow last-resort consumer safety net. Their worry was that without redesign, the scheme would encourage unfair cross-subsidy and larger-than-expected payouts.
Votes
The bill passed both chambers on the voices, so there is no list of individual Aye and No votes for final passage.
House agreed to the bill's third reading on the voices, so there is no list of individual Aye and No votes for final passage in that chamber.
Passed on the voices
In a voice vote, members call out Aye or No and the presiding officer judges which side has it. Individual names are only recorded if a formal division is called.
Senate agreed to the bill's third reading on the voices, so there is no list of individual Aye and No votes for final passage in that chamber.
Passed on the voices
In a voice vote, members call out Aye or No and the presiding officer judges which side has it. Individual names are only recorded if a formal division is called.
Amendments grouped by chamber. These cards include amendment outcomes recorded without a counted division.
Senate
Senator Roberts's second-reading proposal was defeated on voices; it called on the government to include managed investment funds and other historical banking fraud cases in the bill's compensation scheme.
Defeated on voices
The chamber decided this amendment without a counted division, so there is no list of individual Aye and No votes.
The Senate Journal records this outcome as defeated on voices.
Defeated on voices
The chamber decided this amendment without a counted division, so there is no list of individual Aye and No votes.
Parliamentary debate
Start here — lead voices
Stephen Jones supports the bill and says it is needed to establish and fund the compensation scheme of last resortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour., which he says will help consumers get paid when AFCAThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. determinations remain unpaid.
Read in Hansard ↗Stuart Robert says the opposition will not block the bill and will let it pass, but he criticises the government for mishandling the legislation and delaying related financial advice reforms.
Read in Hansard ↗Ayres supports the bill, saying it will establish and fund a compensation scheme of last resortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour. for consumers who have unpaid AFCAThe independent body that decides many banking, insurance, credit and superannuation complaints, and whose unpaid decisions can trigger this scheme. determinations.
Read in Hansard ↗Andrew Wallace says the coalition will support the bill and not delay it, because it improves accountability and creates the compensation scheme of last resortThe backstop scheme that pays eligible consumers when a financial firm does not pay an AFCA decision in their favour..
Read in Hansard ↗All speeches by bloc
3 speakers · 3 support
“The Treasury Laws Amendment (Financial Services Compensation Scheme of Last Resort) Bill 2023 is part of a package of Bills to establish and fund a financial services compensation scheme of last resort (CSLR).”Read the full speech in Hansard ↗
“In response to another recommendation of the Hayne royal commission, the second set of bills being debated today will introduce the compensation scheme of last resort. In the event that the Australian Financial Compliance Authority, AFCA, determines that a consumer is entitled to compensation, they should be compensated by the relevant financial institution, and in many cases they will be. But the CSLR will ensure that, if they can't, then Australians can still receive compensation of up to $150,000 for unpaid AFCA determinations in their favour for financial services or products that include personal advice on relevant financial products to retail clients, credit intermediation, securities dealing and credit provision.”Read the full speech in Hansard ↗
“Passage of this legislation in March 2023 is essential to facilitate the CSLR being operational from December 2023. I want stress that point, Mr Speaker: passage of the legislation in March 2023 will facilitate the CSLR being operational from December 2023; any delay in the passage of this legislation will mean that the Compensation Scheme of Last Resort will not be operational and available to pay claims this year.”Read the full speech in Hansard ↗
4 speakers · 4 support
“We will not deny this bill a second reading. We call on the House, clearly, to recognise the mismanagement of this bill, the government's dishonesty with the Australian people and the need for the government to commit to reducing pressure on inflation not only by controlling its own spending and by not taxing Australians more but by getting on with legislating the Levy review so Australians can have cheaper access to financial services. I support the amendment moved by the member for Hume and commend the bill to the House.”Read the full speech in Hansard ↗
“So whilst I support the legislation, as does the coalition, I just want to put it on the record that I have had concerns and I still have concerns about the concept of a compensation scheme of last resort.”Read the full speech in Hansard ↗
“Whilst we won't deny this bill a second reading—it has taken way too long for the bill to get to this point anyway—we do call on the House to recognise the government's mismanagement of the bill, the government's dishonesty with the Australian people, particularly with respect to tax, and the need for the government to commit to reducing inflation and pressure on the cost of living by controlling its own spending, not by taxing Australians more. I move the second reading amendment circulated in my name:”Read the full speech in Hansard ↗
“The second major part of the new financial regime is that the bills propose to establish a compensation scheme of last resort. This scheme will provide compensation to victims of financial misconduct who have received a determination in their favour from the AFCA, the Australian Financial Complaints Authority, but have not been paid, typically because the financial institution involved in the misconduct has become insolvent. This does not happen very often, but when it does it is very important that victims of those funds do receive compensation. Again, this was a recommendation that came out of the banking royal commission. The proposed scheme of last resort is limited in its scope, in that, firstly, it applies only to unpaid AFCA determinations. The maximum compensation for each AFCA determination is capped at $150,000. The compensation scheme will consider claims for unpaid AFCA determinations if the financial complaint was made to AFCA after 1 November 2018, which was the date that AFCA commenced its operations. Lastly, the scheme will provide compensation to unpaid consumers who've experienced financial misconduct in relation to the following four types of financial products and services: personal advice, credit intermediation, securities dealings for retail clients or credit provision. So there are limited opportunities for the scheme to be used. However, the purpose of it is to ensure the resolution of disputes within the financial system in order to safeguard consumer trust and confidence and to ensure that our financial system is meeting the needs of its users. Coming out of the royal commission was evidence that current arrangements are failing to meet this expectation for Australian consumers, with some consumers and small businesses not receiving compensation to which they should be entitled.”Read the full speech in Hansard ↗
Record
House · Introduced and read a first time
Introduced
The bill was formally presented to the chamber and read a first time, which starts its parliamentary journey.
House · Second reading moved
Second reading opened
A minister or sponsoring member moved the second reading, opening the main debate on the bill's purpose and principles.
House · Second reading debate
Second reading debate
The bill reached this recorded parliamentary step.
House · Referred to Federation Chamber
Referred to Federation Chamber
The bill reached this recorded parliamentary step.
House · Second reading debate
Second reading debate
The bill reached this recorded parliamentary step.
House · Second reading agreed to
Second reading agreed
The chamber agreed to the bill at second reading, meaning it accepted the bill in principle and allowed it to continue.
House · Reported from Federation Chamber
Reported from Federation Chamber
The bill reached this recorded parliamentary step.
House · Third reading agreed to
Third reading agreed
The chamber agreed to the bill at third reading, which completed passage through that chamber.
Senate · Introduced and read a first time
Introduced
The bill was formally presented to the chamber and read a first time, which starts its parliamentary journey.
Senate · Second reading moved
Second reading opened
A minister or sponsoring member moved the second reading, opening the main debate on the bill's purpose and principles.
Senate · Second reading agreed to
Second reading agreed
The chamber agreed to the bill at second reading, meaning it accepted the bill in principle and allowed it to continue.
Senate · Third reading agreed to
Third reading agreed
The chamber agreed to the bill at third reading, which completed passage through that chamber.
Parliament · Finally passed both Houses
Passed both houses
Both houses passed the bill in the same form, completing parliamentary passage.
Assent · Assent
Assent
The Governor-General gave Royal AssentThe final step that turns a passed bill into an Act of Parliament., turning the bill into an Act.
