A SENATE inquiry into primary production financial lending has made 27 recommendations aimed at enhancing farmers’ powers and rights in sensitive areas like debt mediation and farm foreclosures.
The six-month examination by the Senate select committee was Co-chaired by One Nation Queensland Senator and party leader Pauline Hanson, former One Nation Senator Malcolm Roberts and NSW Nationals Senator John “Wacka” Williams.
A key recommendation in the Committee’s final report tabled in the Senate today said the federal government should establish a nationally consistent compulsory farm debt mediation scheme, based on the NSW model, with a $10 million limit on loan amounts.
It also called for the government’s newly established Royal Commission into banking and financial services to “fully consider” the evidence published by the Committee in the context of its inquiry.
That move was backed by Labor Senators who participated in the inquiry through an additional comments section, added to the final report.
“This will ensure that the evidence provided to the committee and the report recommendations can be comprehensively considered and reviewed by the Royal Commission,” Labor Senator Anthony Chisholm said.
“Labor will reserve its position on the recommendations until the Royal Commission has been able to consider the report in full.”
The Committee’s report said numerous submitters to the inquiry had expressed support for farm debt mediation and recommended the implementation of a national scheme, including the big four banks and the Australian Bankers' Association (ABA).
It quoted ABA CEO Anna Bligh in her submission to the inquiry supporting the need for a national approach to farm debt mediation.
“The ABA strongly encourages this committee to consider recommending a national model of compulsory farm debt mediation to help ensure all farmers are treated fairly across Australia,” she said.
“Mediation can help farmers in financial difficulty to re-establish financial viability or to exit the industry with their heads held high.
“It is a less expensive, more accessible and quicker way of resolving a dispute than through the legal system.
“Currently, the process varies between states and territories, and the ABA and its members believe that a national system would provide greater certainty for farmers, especially when their properties cross multiple states.”
Senator Hanson spoke to media at Parliament house in Canberra ahead of the report being tabled, alongside other members of her party including WA Senator Peter Georgiou.
Senator Hanson said the report’s 27 recommendations would help farming families by giving them “more back up” and a “greater say” when dealing with liquidators or receiver managers and make the banks more accountable.
She said the Senate select Committee inquiry was only set up earlier this year because she knew the Prime Minister, at the time, was “totally against” holding a Royal Commission into banking, but that had now changed.
“The report is going to strongly express recommendations that must be carried through to the Royal Commission,” she said.
Senator Hanson said farmers’ concerns had also been ignored and used as “political footballs” by the major political parties.
But she said the report’s recommendations would now provide “answers for the people that have been ignored”.
“We cannot see any more people taking their lives - we can’t see families turned off their farms, their properties, their livelihoods,” she said.
“I hope this is not just another recommendation from a Senate inquiry that’s just thrown into a corner by the other political parties.
“This is not just going to be another waste of time and money – enough is enough.
“These people feel they’ve had no recourse – they’ve had nowhere to go.
“I think this is going to bring some balance to it – we’ve got to stop farming families from being thrown off their properties by the receivers – that has to stop.”
The report recommended the ABA’s Code of Banking Practice be revised in several areas to improve transparency between farmers and their financers and to enhance education and trust.
It also called on the ABA to ensure penalty rates are only imposed on customers in the “most exceptional of circumstances”.
Another recommendation said the ANZ Bank’s takeover of the Landmark loans book should be reviewed by the soon to be incorporated Australian Financial Complaints Authority or an equivalent existing regulatory body.
“During the course of the inquiry the committee was made aware of numerous instances of alleged unreasonable and unethical behaviour by banks, receivers, lawyers and other related stakeholders,” the report said.
“While the committee is aware that some of these allegations are contested, on balance, the broader patterns observed by the committee illustrate that in some circumstances there have been significant problems with the methods in which banks and their agents interact with their primary production customers.
“In addition, although the committee accepts that some allegations are contested, the profound emotional toll that bank and receiver behaviour had on many primary production families cannot be disputed.
“Many farmers who spoke to the committee were often distressed, agitated and spoke of the trauma that their experiences with banks and in particular, receivers, had caused their families.
“They spoke of feeling powerless, humiliated, and intimidated, and of deteriorating mental and physical health.”
The Department of Agriculture and Water Resources told the inquiry that the total indebtedness of the agriculture, forestry and fishing industries – as defined by the Reserve Bank of Australia - to institutional lenders was $69.5 billion at June 30, 2016.
The six month Senate inquiry received 85 submissions and held multiple public hearings including in regional areas taking testimony from farmers and banking or farm receiver/manager representatives.
Farm foreclosures minimal
But in its section on the rates of receivership in the primary production sector, the actual number of instances reported in evidence was extremely low.
“Banks informed the committee that they viewed receiverships as a 'last resort' and generally spent a significant amount of time working with farmers to find other options before commencing any foreclosure action,” the report said.
“For example, ANZ stated: ‘It should be recognised that by the time ANZ takes action under its security documents, the customer has always exhausted all other possibilities to meet their commitments to the bank and other creditors. We estimate that in the past the time between ANZ first issuing a breach or default notice and ANZ taking action under its security documents is on average a period of over 2.5 years for agribusiness customers’.”
The report said Westpac also told the Committee its preference was to work with customers to restore their financial position and resolve defaults without relying on legal rights in loan contracts.
“Rural Bank advised that foreclosure was a last resort, only entered into once all other avenues to remedy defaults had been explored and exhausted,” it said.
“Rabobank also expressed a similar sentiment.
“A number of banks also noted that they only appointed receivers in a small number of cases.
“For example, NAB stated they have 'avoided receivership for all but 1.51 per cent of [their] agribusiness workout [financially distressed] customers in the last twelve months, representing 0.0136 per cent of [their] overall agribusiness book.”
The report said ANZ told the Committee that from October 1, 2015 to March 31, 2017, it had appointed an insolvency practitioner in relation to an agribusiness customer on six occasions.
“In each of these cases, the decision was made at the request of the customer who, after receiving their own independent legal advice, believe that this action was in their best interests,” it said.
“The Commonwealth Bank of Australia informed the committee that in 2016 it instigated enforcement action in relation to six farming businesses and that in those cases they had worked with the customers to explore alternative solutions for an average of 44 months.
“Westpac advised that out of the over 30,600 agribusiness customers on its books, it had only appointed receivers and mangers to 15 customers over the last two years.
“Insolvency firm KordaMentha informed the committee that according to its estimates based upon its market knowledge and bank submissions, receiverships in 2017 will impact on less than 0.05 per cent of Australian farm businesses.”
Financiers be prohibited from making fundamental, unilateral changes to the loan agreements where such changes are detrimental to the customer.
Should a customer suffer any detriment as a result of any unilateral change to a loan agreement by a financier that the financier be liable to pay for those losses and damages.
The government commit funding to train rural counsellors in mediation to ensure that all farmers have access to appropriately qualified and experienced representatives during farm debt mediation.
The government introduce higher standards of accountability and transparency for insolvency practitioners regarding the costs they incur while conducting receiverships
Insolvency practitioners be required to disclose their estimate of costs of the receivership prior to being engaged.
ABA to revise Code of Banking Practice to stipulate that if an amicable agreement between bank and farmer cannot be reached through farm debt mediation and the bank needs to sell the family farm, then: receivers not be appointed; and instead the family (if willing) is to remain managing the property and be paid a wage to maintain it until it is sold/
ABA revise its Code of Banking Practice and the Australian Restructuring Insolvency and Turnaround Association revise its Code of Professional Practice to stipulate that every effort be made by banks and to achieve the maximum sale price of an asset.
ABA must ensure banks offer better training and more comprehensive supervision of bank frontline and management staff to ensure that they deal fairly and reasonably with farming customers and have a sound understanding of the unique characteristics of primary production enterprises.