Treasury is considering options to plug funding gap in compensation scheme, but brokers shouldn’t shoulder the burden, say industry leaders
The Mortgage & Finance Association of Australia (MFAA) has called on the Treasury to ensure brokers are not unfairly burdened by special levies under the Compensation Scheme of Last Resort (CSLR), as the Treasury considers how to fund a shortfall.
The Treasury is consulting on options that include spreading compensation over time, imposing a special levy on the financial advice sub-sector, or extending special levies to several or more sub-sectors.
The broking community is concerned that it will be forced to pick up the tab for claims arising from other segments of the financial sector.
In the MFAA’s submission to the consultation into funding shortfalls in the CSLR, chief executive Anja Pannek said: “A number of these proposals would result in other industries subsidising unfunded claims from the advice sector.”
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.
Launched in April-2024, the CSLR exists to offer compensation to consumers who have experienced financial loss as a result of misconduct or failure by a financial services provider, particularly when all other options for compensation have been exhausted.
“As a matter of principle, we do not support cross-subsidisation whatsoever. The integrity of the scheme depends on linking financial responsibility directly to the source of consumer harm,” said Pannek.
She argued that the CSLR must remain sustainable, equitable, and true to its original intent, pointing out that brokers have demonstrated “strong compliance, low complaint volumes, and solid consumer outcomes under the mortgage broker Best Interests Duty”.
Imposing special levies on brokers would be “unfair, disproportionate, and inconsistent with the purpose of the CSLR”, Pannek added.
Mortgage and finance brokers, mostly all small businesses, already contribute to the CSLR through annual levies, ASIC levies, AFCA fees, and professional indemnity insurance.
“To ask these small businesses to subsidise unrelated parts of the financial sector through a special levy is inequitable,” Pannek said. “It would not only create unnecessary financial burdens but also risk undermining the compliance frameworks and consumer protections that aggregators and brokers invest in every day.”
Pannek highlighted that the broking industry supports 37,000 jobs and contributes $4.1 billion annually to the economy.
The latest CSLR forecasts show no claims are expected from the broking sector for the relevant period, and credit intermediaries are the only sub-sector with no anticipated claims.
Pannek urged the Treasury to ensure any levy arrangements remain consistent with the scheme’s original purpose.
“The CSLR was never intended to impose costs on sectors that are not the source of consumer harm. We urge the Minister to ensure any levy arrangements remain consistent with the scheme’s original purpose.”
FBAA warns against unfair CSLR levies
Pannek’s comments echo those of The Finance Brokers Association of Australia (FBAA), which warned the Labor Government in its submission to the consultation against forcing brokers to pick up the tab for CSLR shortfalls.
“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?” said FBAA managing director Peter White.
White 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,” he said.
Submissions to the CSLR consultation are helping to inform the ongoing CSLR post-implementation review.
