$2m compo fair for ‘worst loss’: Shorten

The Australian 12:00am February 22, 2019

Simon Benson

EXCLUSIVE  Financial institutions could be forced to pay up to $2 million in punitive damages to customers who have been humiliated, stressed or inconvenienced by a bank’s behaviour under a supercharged compensation scheme that will form a key plank of Labor’s formal response to the banking royal commission.

Bill Shorten will announce today the dramatic increase to the compensation scheme for non-financi­al loss claims by consumers, which are currently limited to just $5000.

The cap on financial credit-based claims against banks by consumers would be $2m under the Australian Financial Complaints Authority, quadrupling the current $500,000.

The maximum claims for small businesses who allege losses at the hands of bank misconduct would double to $1m.

The scheme would be retrospective and would allow AFCA to hear unresolved claims back to ­January 1, 2008.

The most significant reform is that, for the first time, claims for non-financial loss would be ­elevated to the same importance as financial loss.

AFCA currently awards com­pen­sa­tion for non-financial loss within the scope of an “unusual amount of physical inconvenience, time taken to resolve a situation, or interference with the complainant’s expectation of enjoyme­nt or peace of mind”. It can also award compensation for banks that humiliate a customer or for “injured feelings”.

Labor said the decision to increase the claims for these complai­nts from $5000 to $2m was “in recognition of the devastat­ing and life-changing impact­s of banking misconduct”.

“People have lost their houses, their businesses, their livelihoods — the banks can’t be let off with a warning and a slap on the wrist,” a document from the Opposition Leader’s office said. Mr Shorten said the “unprecedented” scheme recognised the cost to livelihoods that some families suffered.

“Labor will make the big banks pay what they owe. We will fight for victims to get what they are owed,” he said.

“The banking royal commission uncovered some of the worst conduct in corporate history.

“Businesses and houses were lost, livelihoods destroyed. And while compensation won’t undo all of the damage done by the banks, it will help victims rebuild.”

Of the new scheme, Mr Shorte­n said: “Importantly, this won’t just include loss of possessions and assets — the banks will also have to pay for non-financial loss. Because we know some of the worst loss has come not from a loss of possessions but from the impact on people’s lives.”

Labor has been under pressure to offer a formal response following the government’s announcement of a compensation scheme.