The submission stated that the failure of financial firms to pay AFCA determinations and the resultant impact on the Compensation Scheme of Last Resort is a particularly important issue for the organisations and their members.

“Financial advisers are evidently covering more than 75 per cent of the cost of the CSLR and the cost is expected to increase substantially over the next couple of years. The cost of the CSLR is a major threat to the financial advice sector,” it stated.

“We strongly support greater publicity with respect to those who fail to pay, enabling other participants in the financial services industry to see those entities that have contributed to the cost of the CSLR.”

It continued that since the CSLR was established in April 2024, ASIC has, on a number of occasions, announced the cancellation of AFSLs as a result of the payment of a claim with respect to that AFSL by the CSLR.

“Very little additional detail is made available, which is a suboptimal outcome. We believe that greater awareness of these unpaid determinations is both important and a strong disincentive to those responsible for businesses that put clients in this position,” it stated.

Additionally, the submission stated that in terms of publication of information on unpaid determinations, it would like to see reporting at firm level, for each relevant sector, the total number of unpaid determinations and gross amount payable for both the current year and on a cumulative basis across all years.

It continued that while the association did not want to cause excessive additional work for AFCA, they would like to see this information updated on a monthly basis, or at least quarterly, stating that they consider it may be appropriate for AFCA to issue media releases with respect to specific firms, once the number of unpaid determinations reaches a certain threshold such as 25 or 50.

“This would be an important message for the clients or former clients of this financial firm. The publication of information on unpaid determinations will help the financial advice sector to understand where these problems are arising and be better able to project the likely impact on future CSLR levies,” it stated.

“Consumers of financial services should have visibility of firms that have failed to meet their obligations, particularly where related entities of those failed firms are continuing to operate. It will also help financial firms to hold other firms accountable and facilitate the reporting of phoenixing activity.”

The submission added that the threat of publication of this information provides an additional incentive for firms to pay their determinations on time and without delay or refusal.

“We would expect that the consequences of being named by AFCA would be an important motivator. We consider it particularly unfair for clients of financial service providers who have been exposed to conduct that results in the award of a determination, who have needed to go through the full complaints process, and obtain a determination, to not end up getting paid,” it added.

“In certain cases, depending upon the sector that the firm belongs to such as financial advice, this will be addressed either fully or partially through the payment of compensation by the CSLR.”

However, it stated that in other cases such as managed investment schemes, it will not, due to the limitations of the CSLR and the exclusion of that specific sector.

“AFCA was established to ensure the fair payment of compensation to those clients/consumers who have suffered as a result of misconduct and mistakes. The fact that some clients/consumers do not get paid or are paid via the CSLR, is a reflection on the system as a whole and should be publicly available information,” it stated.

“This can be a useful trigger to highlight the need for further reform or other action by the government or other authorities and delivering this outcome provides the benefit of increased transparency. Where this results in additional reforms, this should better enable overall fairness.”