Royal Commission fails to address ‘receivers’

Opinion: Receivers leave banks and farmers worse off


Agribusiness
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Opinion: The CEO of the WA Rural Financial Counselling Service says the use of receivers often leaves both farmers and the banks worse off financially.

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AS Australians we have a deeply ingrained sense of fairness that hard work should lead to just rewards and that everyone should play by the same set of rules. 

Perhaps that's why the Royal Commission into banking resonated so deeply with so many; the idea that deep injustices may have occurred is intolerable. 

There's no doubt that the Royal Commission uncovered instances where individual banking practices left a lot to be desired. 

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But it's what they didn't cover that I think is of real importance.

The Rural Financial Counselling Service has been involved in WA's rural financial sector for a long time and as an independent service set up to assist farmers in financial distress, we've seen just about everything. 

But one thing I can say is that the use of receivers is a key source of distress for virtually every client where I have seen them used.

Inevitably, once receivers are called in, it never benefits the client economically or psychologically and usually it leaves the bank financially worse off. 

The use of receivers by banks fell outside the Royal Commission's terms of reference and as such isn't being investigated.

However their use has had such a dramatic impact on the client on every occasion that our service has seen them engaged that it is worth asking that their use by banks be examined. 

When banks engage receivers, it's often in a climate where communication has broken down with the client and receivers are called in to keep the difficult decisions that needs to be made at arm's length from the bank.

But one thing I can say is that the use of receivers is a key source of distress for virtually every client where I have seen them used.

But what doesn't seem to be commonly realised, that once appointed, the receivers take over from the owner and replace them in all decisions. 

There is no onus on the receivers to negotiate with the owners on any aspect of the process and as such they can simply turn up and take over the running of the farm without any consideration of the "former farmers".

This process is confronting for those farmers that find themselves in this position and that sense of being replaced and having no control over the key decisions impacting their life is a huge source of stress. 

It can have a damaging and long-lasting affect on many farmers, especially as; in my view, the only winner in these situations is the receiver. 

In my experience, the use of a receiver always increases the operating expenses for any continuing business activity, whether that's seeding, spraying, harvest or anything in between. 

Easily liquidated assets, such as machinery or livestock, are often sold well before the land, meaning the enterprise is sometimes unable to even operate and generate income.

Chris Wheatcroft, chief executive officer, Rural Financial Counselling Service of WA

Chris Wheatcroft, chief executive officer, Rural Financial Counselling Service of WA

And they're often sold at fire sale prices as quickly as possible.

I've seen dairy cows sold for a third of their normal price and specialised machinery auctioned for a quarter of its actual value. 

It's completely up to the receiver whether normal operations, such as adequate spray programs, are conducted and if they're not that too can reduce land values. 

At the end of the day, the former farmers have no say over what the receiver does or doesn't decide to do with the land and assets but they wear the cost. 

Every dollar that the receivers rack up, plus their own fees are payable by the farmer – not the bank. 

Because it's an expensive and inefficient process, normally the farmer walks away with very little and the bank ends up with less than they would have otherwise.

We strongly believe that if people need to exit the industry, they should be able to do so with dignity and the prospect that they have an enjoyable life ahead of them; even if it's not on the farm. 

That's why we always advocate that farmers negotiate with the bank before receivers are called in, and we help our clients do that.

What I would like to see is a model that favours the negotiation process, where parties who are unable to form an agreement enter mediation. 

If that fails, then access could be provided to a process of arbitration where a timely judgement is made as to a fair outcome. 

It benefits both the banks and the farmer to have a process that increases the amount of value retained and it will allow people to move forward with their lives. 

At the end of the day, no one - not the farmer or bank - wants to see a life's work whittled away by a process that just doesn't seem fair.

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