Thursday, March 28, 2024

Banks support farm mediation

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A farm debt mediation scheme will provide consistency and clarity for both farmers and banks and has the support of the banking industry.
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In its submission on the Farm Debt Mediation Bill presented to the Primary Production Select Committee the Bankers Association said it supports the Bill, which has the potential to shorten the amount of time taken to get a resolution and avoid the need for creditor enforcement.

The association said it was working on a farm debt mediation scheme with its members, based on Australian experience, before the Bill appeared.

Most Australian states have legislated farm debt mediation schemes and their experience indicates they can be effective and beneficial for creditors and farmers, the submission said.

“We understand that some lenders to agribusiness operations may not have such processes in place or treat such enforcement mechanisms as a last resort and therefore this Bill seeks to set a minimum standard for lenders generally.

“The Bill’s application to second and third tier lenders or lenders of last resort is a real practical benefit to farmers.”

Banks work closely with farming lenders and when there are problems with farmers being under financial stress they try various options to reach mutually acceptable solutions to avoid enforcement actions where possible, it said.

However, legislation needs to provide banks with a mechanism to act with urgency in certain situations, including where collateral is at risk of damage or destruction, environmental non-compliance, crop wastage, misappropriation of assets, concealment from a creditor, where a farmer requests enforcement action or where there are animal welfare concerns.

In those emergency situations creditors should be able to bypass the mediation process as an interim measure or get an emergency enforcement certificate or court order to preserve the status quo.

Alternatively, the creditor should be able to apply for a protection order on the same grounds, which would allow it to take specified actions to avert those risks while mediation continues.

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