The National Farmers’ Federation has welcomed the federal government's commitment to establish a Farm Debt Mediation Scheme as part of its response to recommendations from the Banking Royal Commission.
Federal Minister for Agriculture David Littleproud has also endorsed recommendations by Royal Commissioner Justice Kenneth Hayne to give special consideration to distressed agricultural loans.
"The Royal Commission shone a bright light on Australia's banking sector, on which Australian farmers are heavily dependent," NFF President Fiona Simson said.
"Justice Hayne's recommendations and the Government's affirmative response, has recognised the unique situations farm businesses often face and the always unequal playing field when negotiating with the big banks."
Ms Simson said the NFF had been advocating for a Farm Debt Mediation Scheme for some years.
"When farm loans become distressed there are many complex issues to work through.
"The chance to refer a challenged farm loan to mediation represents a greatly enhanced chance to reach an outcome that is fair and equitable for all involved."
The chance to refer a challenged farm loan to mediation represents a greatly enhanced chance to reach an outcome that is fair and equitable for all involved.
Ms Simson acknowledged the Government's endorsement of the recommendations to have 'specialised' agricultural bankers manage distressed farm loans; to cease the pursuit of interest repayments when there is no reasonable prospect of recovery and that the appointment of receivers should be a remedy of last resort.
"The recommendations are particularly salient at the moment as farmers across the eastern seaboard and Tasmania manage drought, floods and bushfires.
"No doubt farmers contending with these natural disasters will need to negotiate paths forward with their lenders.
"The recommendations outlined by Justice Hayne form a sound basis from which these negotiations should be had," Ms Simson said.
Mr Littleproud also said he had been pushing for a single national approach to farm debt mediation service and he’d ask state agricultural ministers to support the move when they meet on Friday at the Agricultural Ministerial Council.
“It’s no good having one farm debt mediation system in NSW and another one in Queensland – we need a harmonised national approach so farmers know what to expect,” he said.
“I’m also glad our government is going a step further and extending the remit of the Australian Financial Complaints Authority (ACFA) to allow aggrieved farmers seek redress from the banks for wrongs committed back to 1 January 2008.
“The Treasurer’s announcement supporting the removal of default interest charges to farmers suffering drought or a national disaster is a very good one and I call on the Australian Banking Association to immediately amend the Banking Code to give effect to this recommendation.
“It’s time that despicable practice ended full stop because I don’t believe the rate the banks charge reflects the actual cost to them.”
Mr Littleproud also said the Treasurer’s announcement that the valuation of farm land would need to be independently determined from the lending processes was another strong move but that the banks would need to work to limit the cost to farmers from this.
“I’ve always said we need to make sure the banks use staff who have agricultural experience and so the change to make sure distressed farm loans will only be managed by those with agricultural experience is common sense,” he said.
“I understand from the evidence heard that most banks, with the exception of Rabobank, decreased their regional footprint and expertise and I hope they’ll now work towards restoring strong, local knowledge as part of their strategy to help agriculture reach its full potential.
“Receivers will now be used only as remedy of last resort; which they always should have been, and there will now be a compensation scheme of last resort which farmers can use.”
- The Agricultural Ministerial Council agreed to work on general principles supporting a harmonised national Farm Debt Mediation Scheme in April 2018
- Currently Victoria, NSW, Queensland and South Australia have legislated schemes, which are relatively similar in their approach and require lenders to offer Farm Debt Mediation at the time they are considering taking enforcement action against the borrower
- Western Australia maintains a voluntary scheme and the Northern Territory, ACT and Tasmania currently do not have a scheme in place
- The Government’s expansion of ACFA’s remit to consider complaints dating back to 1 January 2008 will be in place for 12 months to cover the period covered by the Royal Commission, for eligible complaints that meet ACFA’s thresholds.For more information on ACFA see https:///www.afca.org.au/
- During the current drought some banks have already removed default interest charges as part of their drought assistance packages