The CEO of the AIOFP, Peter Johnston, shares a response from a member’s local ALP politician

Hi, below is a response from a MEMBER’S local ALP Politician when asked about the CSLR issue.

It is a typical ‘PRO FORMA’ response full of motherhood statements from the Ministers office [more than likely by a former Treasury Bureaucrat]  – the dictionary definition of a motherhood statement is a vague ‘feel good’ platitude, especially by Politicians that few people will disagree with….. – this means they are getting worried and the strategy of writing to your local Member is starting to bite.

The response does not address the stench around the Dixon manipulation or how the original intentions of Comm Hayne’s CSLR recommendations have been bastardised [by the Bastards] to suit the Institutions and unfairly blame the Advice community for product failure.

As we know, all the Minister has done since the Education Pathways success is increased compliance costs and extort money out of the Advice community to fund the Dixon victims……which includes Canberra Bureaucrats.

Please keep up the pressure on your local member, especially if they are a sitting ALP Federal Politician in a marginal seat like the Federal Member for Paterson below.

Friday, July 19, 2024 3:47 PM
To: Peter Johnston <pjohnston@aiofp.net.au>
Subject: Fwd: compensation Scheme of Last Resort

 

Hi Peter

I wrote to my local federal member.

See response below.   Regarding the CSLR the response has got me confused.

 

Kind Regards

 

From: Lindsay, Peta (M. Swanson, MP) <Peta.Lindsay@aph.gov.au>
Sent: Thursday, July 18, 2024 6:28 PM
Subject: re: compensation Scheme of Last Resort

 

Good morning Christopher,

Thank you for your email to Meryl Swanson MP, Federal Member for Paterson, concerning the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (DBFO Act) and funding arrangements for the Compensation Scheme of Last Resort (CSLR).

Meryl has asked me to respond on her behalf.

Quality financial advice and information can support Australians to earn more and keep more of what they earn. Access to affordable advice can also protect consumers from scammers and supports their resilience and management of cost-of-living pressures.

The Government has passed the first tranche of legislation to deliver its comprehensive package of reforms to ensure Australians have access to quality and affordable financial advice. The DBFO Act implements reforms which reduce unnecessary red tape that adds to the time and cost of preparing financial advice without providing consumer benefits.

In relation to advice fee deductions from superannuation funds, the legislation clarifies that Australians can use their superannuation to pay for personal financial advice about their superannuation, including through arrangements with an external financial adviser. The Government engaged constructively with stakeholders and amended the legislation in response to feedback it received. The current obligations on superannuation trustees which govern the usage of member funds and protect consumers from inappropriate deductions will continue to apply.

The CSLR facilitates compensation of up to $150,000 to eligible consumers who have an unpaid determination from the Australian Financial Complaints Authority (AFCA) relating to personal financial advice, credit intermediation, securities dealing and/or credit provision. The CSLR strengthens the financial system by providing victims of financial services misconduct with access to redress and compensation. The CSLR started operating from 2 April 2024 and has already started compensating eligible consumers.

Establishing the CSLR was recommended by the 2017 Supplementary Final Report of the Review of the financial system’s external dispute resolution and complaints framework (Ramsay Review) and the February 2019 Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Hayne Royal Commission).

The CSLR is industry-funded in line with the recommendations of the Ramsay Review. This feature was consistent with the legislation introduced by the previous government. The annual CSLR levy is imposed on in-scope subsectors, that is, those financial service subsectors whose products and services are covered by the scheme.

Eligible complaints lodged with AFCA between 1 November 2018 and 7 September 2022 are expected to result in a cost of $241 million for the CSLR. In recognition that this cost may be beyond the capacity of in-scope subsectors, this cost is being funded through a one-off levy imposed on Australia’s ten largest banks and insurers.

In-scope subsectors will be levied $24.1 million to fund claims processed in the 2024-25 financial year, with in-scope subsectors levied annually thereafter.

The CSLR was also designed to be financially sustainable for in-scope subsectors. To ensure this financial sustainability, there is a $20 million subsector cap and a $250 million scheme cap on industry levies imposed each financial year. The Minister must be notified if the $20 million industry subsector cap is expected to be exceeded for an upcoming financial year. The Minister may then determine that compensation payments be paid to consumers in instalments over time and/or that a special levy be issued. A special levy may be issued to in-scope and/or out-of-scope subsectors. The CSLR legislative framework permits the Minister to intervene only if a subsector cap is exceeded, which has not occurred to date. The Government will continue to monitor the implementation and operation of the scheme to ensure it is meeting its policy intent.

The Government is also prioritising expanding access to safe, affordable and quality financial advice to deliver better outcomes for the millions of Australians seeking financial advice and information.

The Government is developing a second tranche of reforms to further increase access and affordability of financial advice over the second half of this year. These reforms include the Government’s commitment to reform statements of advice, modernise the best-interests duty and remove the safe harbour steps, and increase the provision of simple advice by financial institutions.

Thank you again and if there is any other Federal Government matter Meryl can assist you with please do not hesitate to contact her office.