Treasury has published a Discussion Paper on the Compensation Scheme of Last Resort, first recommended by the Ramsay Review in 2017 and also recommended by the Financial Services Royal Commission in 2019.

It would cover compensation for consumer and small business victims of bank misconduct in the event the provider was unable to pay.

The scheme will be industry-funded, operated by AFCA and extend beyond personal advice failures.

The discussion paper seeks views on coverage, funding arrangements, compensation to be paid, and how the scheme should evolve over time.

The questions it asks include:

• What is the appropriate coverage for the CSLR, beyond the provision of personal advice?
• Would there be any unintended consequences from initially excluding court and tribunal decisions or from excluding voluntary members of AFCA from the CSLR?
• To what extent should the funding model be based on risk?
• How should the risk be assessed?
• Should the funding model assess risks at the individual financial firm level or at the financial service class level?
• Should a risk-based funding model apply to all CSLR costs?
• To what extent should the funding model be based on a firm’s ability to pay?
• How should the ability to pay be assessed?
• What are suitable universally available metrics to assess a firm’s ability to pay?
• How should the funding model address unexpected costs?

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