It urges swift reform to protect brokers from disproportionate costs
The Mortgage & Finance Association of Australia (MFAA) has welcomed the Coalition’s pledge to reform the Compensation Scheme of Last Resort (CSLR), calling for immediate and pragmatic changes to ease the burden on mortgage brokers.
Shadow assistant treasurer and shadow minister for financial services Luke Howarth told attendees at a Sydney election event on Thursday that fixing the CSLR would be a top priority for the Coalition if elected.
Responding to the comments, MFAA chief executive Anja Pannek (pictured above) said the association supported the CSLR in principle, but stressed the scheme must be sustainable, proportionate, and not unfairly impact brokers.
“We have consistently supported the CSLR, it is an important avenue for consumers to seek compensation,” Ms Pannek said. “However, the scheme needs to be fit-for-purpose, sustainable and proportionate and we support any calls for an urgent, pragmatic and quick overhaul of the scheme.”
She said there was no consistent pattern of consumer harm linked to mortgage broking, and that this should be considered when determining how the scheme is funded. Pannek also warned against placing further financial strain on brokers, who are already dealing with increased levies only a year after the scheme’s implementation.
“We don't want to see the broking industry, which is already experiencing an increase in levies only one year into the scheme, to fund special levies when the reality is that brokers are producing good consumer outcomes, in the best interests of their clients,” she said.
The MFAA recently made a detailed submission to the post-implementation review of the CSLR, recommending that access to the scheme only occur after all other avenues, such as professional indemnity insurance, have been exhausted. It also urged the government to reassess how funding gaps are addressed, calling for fairer treatment of sub-sectors like mortgage broking that have limited links to consumer loss cases.
The association further raised concerns about how claims are currently assessed under the “but for” test used by the Australian Financial Complaints Authority, suggesting a focus on actual capital loss instead. Additionally, it called for limits on CSLR administration costs to prevent overheads from eroding the scheme’s purpose.
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