The Mortgage & Finance Association of Australia (MFAA) has criticised the federal government’s plan to impose a FY25–26 special Compensation Scheme of Last Resort (CSLR) levy on mortgage and finance brokers to cover advice‑related misconduct.
Following a roundtable led by assistant treasurer and minister for financial services, Daniel Mulino, the government confirmed a $47.3 million compensation shortfall will be funded by all retail‑facing financial services sectors, including brokers, despite the claims arising entirely from financial advice failures.
The move comes as CSLR levy pressures surge more broadly, with the scheme’s 2026–27 initial estimate jumping to $137.5 million for around 912 claims – almost double the revised $75.7 million requirement for the previous year.
The levy will be apportioned based on each sector’s share of ASIC’s 2023–24 supervisory costs.
Mortgage and finance brokers will pay 1.4% of the special levy, reflecting what Treasury describes as minimal regulatory activity and a very low unpaid compensation footprint.
Treasury modelling indicates this equates to around $7 per credit representative, or about $667,529 across the sector, while financial advisers are expected to contribute around 22%.
MFAA CEO Anja Pannek (pictured) said that while the association recognises the challenging fiscal context, the decision is a blow for brokers.
“This is an additional cost burden for our members and the industry,” Pannek said.
She has previously made clear the MFAA’s stance on CSLR funding: “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.”
“We remain firm in our position: mortgage and finance brokers, who have one of the lowest levels of misconduct across the financial system, should not be required to cross-subsidise compensation for failures occurring entirely outside the credit intermediaries sub-sector in perpetuity.”
Pannek acknowledged the significant consumer harm in advice cases such as First Guardian and Shield, and the long wait many victims have faced for redress.
“We deeply empathise with consumers impacted by advice failures, with many having to wait for up to eight years for redress,” she said.
“But fairness matters. Levies should reflect actual sources of misconduct, and long-term CSLR sustainability must be achieved without imposing regressive impacts on low-risk, small-business sectors.”
Pannek earlier noted that brokers are predominantly small businesses that already pay through the annual levy framework, ASIC levies, AFCA fees and professional indemnity insurance, making any further special levy “inequitable”.
MFAA welcomed Mulino’s commitment to a broad CSLR review, with discussion papers due in early 2026 on:
“We continue to support a fair, sustainable, and well-targeted framework," Pannek said. “The coming review is an important opportunity to address structural drivers of misconduct, improve recoveries from wrongdoers, and ensure the CSLR remains true to its purpose as a genuine ‘last resort’ scheme.”
She stressed that any future approach must reflect the strong conduct record of brokers.
“Any future approach on the CSLR must recognise the positive outcomes delivered by mortgage and finance brokers,” the MFAA leader said.
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