Farmers cut slack via new debt law
Farmers in financial strife may have more wriggle room to deal with banks as proposed debt mediation law is tweaked.
If it becomes law, the Farm Debt Mediation Bill will require secured creditors who lend money to farmers to offer mediation before taking enforcement action if farmers default on payments.
The primary production select committee has made a number of recommendations to clarify the meaning of some key terms and to make the bill more practical.
The committee has recommended broadening the definition of ‘‘enforcement action’’ to include an application by the creditor (most likely a bank) to have the farmer declared bankrupt. It has also recommended adding a requirement that creditors must accept a request for mediation unless they have good reason to decline.
The agricultural sector currently has about $63 billion of debt and the Federated Farmers six-monthly banking surveys have shown that while most farmers are satisfied with their banks, satisfaction has been slipping and the number of farmers feeling under pressure has been rising.
Yesterday, Federated Farmers sharemilking chairman Richard McIntyre said that in most situations a struggling farm business did not end in a bank taking action – it ended because the farmer sold up after the bank put pressure on them about an overdraft. ‘‘In cases like this mediation would be beneficial.
‘‘Previously it would only happen if banks agreed to it.
‘‘Now a farmer can say: I am under pressure, things are not going well.’’
Another proposed change was to cap the farmer’s contribution towards the mediator’s costs at $2000, which McIntyre said would be welcomed by farmers who were concerned the cost could be another financial pressure that could prevent them from using the process.
The committee has also recommend inserting a clause to allow a secured creditor to apply to the High Court to take action in situations of urgency, which
McIntyre said was concerning.
Farmers would want to ensure there was a high test for what would constitute ‘‘urgency’’.
He said the committee took the complex nature of farm ownership into consideration when recommending amending the definitions of farmer, primary production business and security interest.
McIntyre said the proposed changes were a good outcome for farmers, who had asked for the proposed law to be tweaked.
‘‘We didn’t get everything we asked for but I think the committee understood what we were trying to achieve.
‘‘For the most part, they found a balance.’’