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COTA

Submission to the Inquiry into Scrutiny of Financial Advice into last resort compensation scheme

Joint submission - 5 May 2015

The following consumer organisations have joined together to make this submission to the Inquiry into Scrutiny of Financial Advice:

  • Consumer Action Law Centre
  • Consumers Federation of Australia
  • Council of the Ageing (COTA) Australia
  • CHOICE
  • Financial Counselling Australia
  • Financial Rights Legal Centre
  • Superannuation Consumers Centre

The terms of reference for this inquiry include consideration of "whether existing mechanisms are appropriate in any compensation process relating to unethical or misleading financial advice and instances where these mechanisms may have failed". It is our view that the fact there is significant uncompensated loss incurred by investors demonstrates that existing mechanisms have failed, and there is an urgent need to establish a last resort compensation scheme for consumers who sustain uncompensated losses in the finance sector.

We welcome the recent comments made by some of the members of the Senate Standing Committee that there is a need to consider a last resort compensation scheme.i We also welcome comments from some large banks that appeared before the inquiry that there is a gap in existing compensation frameworks. Consumer advocacy organisations have long supported the establishment of last resort compensation scheme, including in submissions to the Richard St John Review of Compensation Arrangements. This submission provides:

  • an overview of the failure of existing compensation arrangements,
  • the impact of uncompensated loss for affected consumers,
  • the need for a last resort compensation scheme, and
  • suggestions for the design of a last resort compensation scheme.

 

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