Financial misconduct compo scheme revived

·1-min read

A bill introduced to parliament could see many victims of financial misconduct finally get the compensation they are owed.

The purpose of a compensation scheme of last resort is to make sure victims of financial misconduct can get compensation even if the offending financial institution has not paid up.

Assistant Treasurer Stephen Jones introduced a bill for a compensation scheme of last resort to parliament on Thursday.

Such a bill was initially introduced by the coalition government but it never went to a vote.

A compensation scheme of last resort scheme was recommended by the banking royal commission but was first floated in 2017 by the Ramsay review of the financial system.

The review found consumers who had lost money through financial misconduct were sometimes unable to get any money back because the financial institution in question had since gone bust.

The Labor government has stuck with a $150,000 cap on how much victims can receive through the scheme and has also decided not to include managed investment schemes.

Mr Jones said the $150,000 cap "helps to maintain the ongoing financial sustainability of the scheme at the same time as balancing the interests of consumers".

When in opposition, Labor senators said the coalition's scheme was too narrow in scope and called for the inclusion of managed investment schemes in the compensation scheme.

If implemented, the scheme will be funded by a levy on the 10 largest financial entities, excluding private health insurers and super funds.

Financial institutions can expect to be hit with the first levy in 2024/25 if the bill is passed.

The compensation scheme of last resort bill is part of a larger package of bills finalising recommendations from the banking royal commission.