Industry body urges reforms that reflect each sector's misconduct record
The Mortgage & Finance Association of Australia (MFAA) has declared its support for fair and sustainable settings under the Compensation Scheme of Last Resort (CSLR) and called for levy arrangements that are proportionate to each sector's misconduct record and compensation claims.
The association has raised concerns about cross-subsidisation within the scheme, particularly in light of the FY27 levy estimate of $137.5 million and the potential for further cost increases linked to the Shield and First Guardian matters.
The MFAA's position was put forward at a CSLR roundtable convened by assistant treasurer and minister for financial services Daniel Mulino, thich brought together regulators including the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA), and the Australian Financial Complaints Authority (AFCA), alongside Treasury representatives, consumer groups, and peak bodies from banking, insurance, superannuation, and financial advice.
It followed a Treasury consultation on reforms aimed at strengthening consumer protections and improving the scheme's long-term financial viability, to which the MFAA lodged a formal submission.
"Mortgage brokers play a critical role in the Australian home lending market, facilitating 76.7% of all new residential home loans in the December 2025 quarter," said Anja Pannek (pictured top), MFAA chief executive. "At the same time, complaints involving brokers account for less than 1% of banking and finance complaints received by AFCA and, based on current FY27 estimates, no CSLR claims are expected to arise from the credit intermediary sector.
"These figures highlight the importance of ensuring the CSLR remains fair, proportionate and appropriately targeted. Sectors with strong consumer outcomes, low levels of misconduct and minimal compensation claims should not be required to shoulder an unreasonable share of the scheme's costs."
"The MFAA supports the objectives of the CSLR as a genuine compensation scheme of last resort. However, it is critical that the scheme's design and funding arrangements remain sustainable and aligned with its original policy intent as a true last resort mechanism for consumers seeking redress after all other reasonable avenues of recovery have been exhausted."
Pannek said achieving this balance would help ensure consumers remain protected while maintaining a fair and equitable framework for the financial services sectors that fund the scheme.
In its formal submission, the MFAA set out several key positions. The scheme should function as a genuine last resort, with all other recovery options — including insurance and regulatory action — exhausted before the CSLR is engaged. The framework should include stronger fund recovery mechanisms to reduce costs borne by levy-paying sectors. Compensation settings for financial advice complaints should focus on direct financial losses to support scheme sustainability.
The MFAA also supports revisions to the special levy waterfall structure, so that sectors more directly linked to consumer harm contribute first before costs are distributed more broadly. It has further called for simpler and more transparent levy and administration arrangements, and for the mortgage and finance broking sector's low complaint and claims profile to be recognised in how levy obligations are calculated.
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