FOS demands licensee-funded consumer protection scheme

The proposal was made in light of the 105 FOS determinations made in favour of consumers that remain unpaid.

The total amount owed by 22 providers to consumers amounts to $10,157,401.23; and in 73% of the cases the primary provider involved was a financial planning business.

The FOS said that the default consumer protection scheme would enable the establishment of a fund structured as a separate legal entity to ensure consumers are paid when awarded compensation in a FOS decision.

The submission also asked for a reframe of the consumer protection regulation that is "more clearly based on the fair treatment of customers at all stages of what is an increasingly integrated product design, origination and distribution system."

It said that the Murray inquiry should include "an additional consumer outcome with a specific focus on the importance of enhanced support arrangements for vulnerable consumers and those currently excluded from or on the margins of the formal financial services sector."

The document says that the inquiry should recommend "that the regulatory gap in current consumer protection arrangements be fixed.

"This is not about imposing any new regulatory obligations. Rather, it is to ensure current legal obligations operate as they should and provide adequate compensation arrangements for all retail customers," the FOS said.

It also noted that "continued support is essential to enable the provision of assistance on financial service issues to vulnerable and disadvantaged consumers."

The FOS expressed concern that in the absence of these arrangements "entities will operate outside the regulatory net and that vulnerable consumers will be targeted by predatory business practices."