Brokers could be forced to pick up tab for other sectors' failing, says broking industry body
The Finance Brokers Association of Australia (FBAA) has warned the Labor Government against forcing brokers to pick up the tab for shortfalls in the national Compensation Scheme of Last Resort (CSLR).
The comments come as the window closes on submissions to the government’s consultation into funding shortfalls in the CSLR.
Assistant Treasurer Dan Mulino initiated the consultation after estimated CSLR claims costs for the personal advice sub-sector in 2025-26 were projected to hit $67.3 million – far surpassing the $20 million levy cap for the sub-sector.
The CSLR is there to provide compensation to consumers who have suffered financial loss due to the misconduct or failure of a financial services provider, specifically when other avenues for compensation have been exhausted.
It is partially funded through a $1,000 levy on all brokerages, plus an extra $43 per credit representative, but there are concerns that a special levy could be implemented to pay for excess costs.
In its submission to the Treasury, the FBAA stated brokers shouldn’t be forced to bear the brunt of financial advice failures which they had no part in.
FBAA managing director Peter White (pictured) has expressed criticism over the CSLR’s funding model, particularly with brokers potentially facing higher levies.
“When the CSLR was first proposed, the FBAA warned it wasn’t appropriate to take funds from unrelated sectors to cross-subsidise failings in another sector,” he said.
“Why should brokers be forced to pay towards AFCA (the Australian Financial Complaints Authority) fees and higher scheme administration costs for shortcomings in another sector?” added White, who also cited concerns the model prioritised payments of fees to the scheme administrators and external dispute resolution.
“The forecast increase in payments relates to failings in the financial advice sector, not the broking sector, and I don’t want to see our industry unfairly penalised,” White said.
FBAA regulatory compliance specialist David Carson called on the government to make a financial contribution to the CSLR.
“Government can’t continue to look at industry as a bottomless supply of money,” Carson said. “We recognise there are consumers who are affected by the actions of bad actors, and we support measures designed to assist them”.
“However, this scheme is barely 12 months old and we already have a problem. We don’t want to see honest, hardworking businesses deprived of vital income, especially when the failures in this scheme substantially lie at the feet of government and regulators.”
Submissions to the consultation will help to inform the ongoing CSLR post-implementation review.
