The EDR Review Panel has issued an Issues Paper seeking the views of interested parties on
- the establishment, merits and potential design of a compensation scheme of last resort; and
- the merits and issues involved in providing access to redress for past disputes.
In April 2017, the Panel made 11 recommendations to enhance the financial system’s dispute resolution framework, recognising that consumers and small business should have effective access to redress. On 9 May 2017, the Government accepted all of these recommendations. Background.
The Panel’s view is that implementation of these recommendations will help to ensure that financial firms will provide compensation for wrongful losses through the EDR system. However, in a limited number of cases this may not occur, for a number of reasons.
Categories of disputes
Image from Issues Paper. Click to enlarge
The Panel takes as its starting point the premise that a compensation scheme of last resort is to be considered in the context of a future dispute which:
- has been the subject of a decision; and
- has remained unsatisfied because, for example, the firm is insolvent, has ceased trading or otherwise has insufficient assets to pay the claim.
The Panel also considers that potential scenarios could include where:
- the financial firm no longer exists (for example, because of insolvency) and therefore the dispute was either never lodged with an EDR scheme or was lodged but unable to proceed to determination;
- the monetary value of the dispute exceeded the EDR scheme’s monetary limits at the time, but could potentially fall within the monetary limits of the new Australian Financial Complaints Authority (once established);
- the dispute was outside of the EDR scheme’s time limits; or
- the consumer or small business did not pursue their dispute with the EDR scheme for other unspecified reasons (for example, because of personal circumstances, the costs of pursuing the dispute or emotional distress).
The Panel considers that separate arrangements may need to be put in place to address legacy uncompensated losses, such as existing unpaid EDR determinations.
As at 2 May 2017, $13,909,635.50 (excluding interest) and $399,862 (excluding interest) in determinations made in favour of complainants by FOS and CIO, respectively, had not been paid.
The Issues Paper seeks comments on a variety of proposals.