It is estimated that consumer claims in these complaints total more than $691 million. These complaints have had to be paused due to the firms’ insolvency.
Comparatively, there were 4,817 open complaints – involving 52 financial firms and estimated claims of more than $689 million – as of 1 February 2023.
More than 1,800 complaints are now lodged against a financial adviser firm, Dixon Advisory and Superannuation Services, which was placed into voluntary receivership in January 2022.
In addition, as of 1 March there were 306 unpaid determinations associated with 28 insolvent firms, involving awards totalling an estimated $14.7 million, which is steady with 1 February 2023.
The Australian Financial Complaints Authority (AFCA) revealed in its latest overview there were 19 financial advisors/planners which had 1,968 complaints made against them totalling $374,301,557, as well as six MIS operators/fund managers with 272 complaints totalling $28,074,948.
AFCA has cautioned that individual complaints may or may not be eligible for compensation from the Compensation Scheme of Last Resort.
“AFCA will only be able to fully assess the impact of the CSLR and its relevance to paused complaints once the scheme is legislated. We will review all relevant complaints as soon as that occurs,” it said.
A bill to establish the Financial Services Compensation Scheme of Last Resort was introduced into the House of Representatives last week which will provide compensation to consumers where they have an AFCA determination in their favour and where the relevant financial institution has not paid the consumer in accordance with the determination.
Compensation will be capped at $150,000, whereas AFCA can order compensation up to $540,000. It’s likely that in a large number of cases CSLR compensation will not match the amount awarded in the AFCA determination.
CSLR will also not cover all the areas where AFCA has jurisdiction. To be eligible for CSLR compensation, the AFCA determinations must involve credit activity, financial product advice and dealing in securities. Managed investment schemes are not covered.
