A Shorten Labor Government will establish a comprehensive and unprecedented compensation scheme for victims of banking misconduct, giving those who have had their lives ruined by the banks a chance at proper compensation.
Labor’s scheme will mean that more consumers and small businesses will be eligible to apply for compensation, they will have more time to do so, and they will be eligible to receive far more compensation. Unlike the Liberals, Labor will set up a comprehensive, independent retrospective compensation scheme to help thousands of Australians who have already been ripped off by the big banks and dodgy companies, including those who weren’t treated fairly by the ombudsman.
The horror stories that came out of the Royal Commission have shocked every Australian. It’s clear that victims need a stronger response to ensure that their complaints are properly assessed and that compensation comes close to matching the disgraceful conduct of the big banks.
Compensation won’t undo all of the damage inflicted by the big banks – but it is important to help victims recover and in some cases, restart their lives.
For the first time, non-financial loss will be put on the same footing as financial loss, in recognition of the devastating and life-changing impacts of banking misconduct. People have lost their houses, their businesses, their livelihoods – the banks can’t be let off with a warning and a slap on the wrist.
Critically, banking victims will get the chance to have their cases reheard even if they missed out compensation in the past because of a bad decision by an ombudsman or abuse of the court process.
This is the most significant compensation scheme in Australian history.
Labor’s scheme will include:
- Significantly increased compensation caps at AFCA – Labor will double the compensation cap for small businesses, and quadruple the compensation cap for consumers with credit-related disputes. Consumers and small businesses will now be eligible for up to $2 million in compensation – up from $500,000 for consumers and $1 million for small businesses.
- Compensation for non-financial loss will be put on the same footing – Increased from the current AFCA cap of $5,000 to up to $2 million for consumers and small businesses.
- Increased eligibility limit for consumers – The value of claims that ACFA can consider will be increased from $1 million to $2 million – meaning more Australians will be able to have their cases heard.
- A Retrospective Compensation Scheme – Providing Australians with a second chance to argue their complaints and get compensation up to the new caps. Consumers and small businesses will be able to have claims heard for actions back to 1 January 2008, and will have two years to submit the claim. This will allow more vulnerable people who are harder for services to reach to be notified about the scheme and their right to make an application.
To oversee all decisions made by the scheme and ensure procedural fairness and consistency of decision making, Labor will establish an independent board made up of independent experts in the field, including representatives from industry and consumer groups and an independent chair, funded by a levy on AFCA members.
The Board will determine access to the scheme, oversee decisions made by the scheme, and establish processes and procedures for how the scheme will resolve each type of dispute, and provide recommendations to Government about the precise funding model for the scheme.
The Board will also be responsible for considering applications from people who have a dispute with a financial service provider (FSP) that is now insolvent. Once the two year application period has ended, the total quantum of compensation ordered against insolvent FSPs will be considered and the Board will recommend a total cap for compensation to be pro-rated for consumers with a legitimate claim in this category, balancing the need to legitimately compensate consumers while not wanting other banks to unfairly pay for the unlawful conduct of now-insolvent companies.
The Liberals’ proposed compensation scheme is woefully inadequate and doesn’t even begin to rectify the years of misconduct by our banking institutions. It is too limited, with compensation amounts too low, and has too short a timeframe.
The Liberals will force taxpayers to fork out $30m to compensate victims with past unpaid claims from ombudsman schemes. Labor will make sure these victims get the compensation they are owed, but under Labor, it will be industry, not the taxpayer, that foots the bill.
Labor’s compensation scheme will help address the vast imbalance between consumers and the big banks, with their deep pockets and high flying legal teams.
The Banking Royal Commission revealed systemic unconscionable conduct at the heart of our financial services industry – a standard where ripoffs and rorts weren’t just overlooked, they were part of the business model.
Scott Morrison voted against a Banking Royal Commission 26 times. He refused to give Parliament enough time to act on the Royal Commission recommendations before the election. And he has a compensation proposal that lets banks off with a slap on the wrist, leaving victims to pay the price.
This announcement proves that only Labor can be trusted to act and clean up this behaviour once and for all. Labor fought to establish the Royal Commission and we will fight for justice for victims of banking misconduct.
