The Albanese government has introduced legislation that will force banks to fund a compensation scheme for ripped-off customers.

Assistant Treasurer Stephen Jones tabled the Financial Sector Reform Bill 2022 on Thursday; it will enact royal commission recommendations that were promised but not delivered by the Morrison government.

‘‘It is disappointing that I have to introduce these measures here today,’’ Mr Jones told The House of Representatives.

‘‘These measures all should have been implemented and introduced by the previous government.’’

The industry-funded compensation scheme will give victims of financial misconduct access to funds if the company that ripped them off goes bust before paying them what they are owed.

It will be funded by a levy on Australia’s 10 largest financial sector entities, excluding superannuation trusts and private health insurers.

This will raise up to $250 million a year that could be handed to victims of financial misconduct, as determined by the industry’s ombudsman.

‘Far short’: Calls for stronger scheme

Consumer advocates Choice welcomed the reforms, saying thousands of Australians have been waiting more than three years for the scheme.

But Patrick Veyret, head of policy at Choice, said Labor’s reforms don’t go far enough.

He called on Parliament to amend the law to raise compensation caps to be in line with the 2019 royal commission’s recommendations.

‘‘We’re calling on the Parliament to raise the cap from $150,000 to $542,500,’’ Mr Veyret said.

“Families across Australia have been waiting for compensation for years, so many households have been affected by financial misconduct and have lost money.’’

Choice chief executive Alan Kirkland said both the Hayne banking royal commission and the earlier Ramsay review ‘‘made it clear that the caps should be the same’’ as those under the Australian Financial Complaints Authority (AFCA), which will help administer the scheme.

Under the current reforms, a consumer who has a financial complaint determined in their favour by AFCA will only receive up to $150,000 in compensation, even if the money they lost is more than double that.

‘‘[The cap] in this bill will fall far short for many victims,’’ Mr Kirkland said.

Choice also wants the government to ditch a carve out in the reforms for managed investment schemes that would mean customers of these firms wouldn’t have access to last resort compensation.

‘‘While we understand that it may take more time to address the many problems with managed investment schemes, we are seeking a clear timeline and process from the federal government to address those issues,’’ Mr Kirkland said.

Mr Jones noted calls for the scheme to be expanded in his speech to Parliament on Thursday, but stopped short of committing to change.

‘‘The cap on claims helps maintain the ongoing financial sustainability of the scheme, at the same time as balancing the interests of consumers.’’