The Farm Debt Mediation Bill, approved by Cabinet this afternoon, will require creditors to offer farmers who default on payments mediation before they take any enforcement action, Agriculture Minister Damien O’Connor said at the post-Cabinet press conference.
“Total farm debt in New Zealand is $62.8 billion, up 270% on 20 years ago.
“Farmers are especially vulnerable to business downturns as a result of conditions that are often outside their control, like weather, market-price volatility, pests and diseases like Mycoplasma bovis.
“Farmers who operate a family business often don’t have the resources to negotiate their own protections when dealing with lenders. That’s where this piece of legislation fits in.”
The Bill is pragmatic, O’Connor said.
“The guts of it is early intervention – where either the farmer or the bank has an ability to go and seek mediation, which is a far better option than forced foreclosure.
“This is an issue that’s been floating around for quite some time, way back to when we were in Government last. The Bill was initially a private members bill in the name of NZ First MP and agriculture spokesman Mark Patterson.”
Patterson said when a farmer is in financial distress a system of mediation might help find solutions and avoid property foreclosure.
“It offers a fairer system and is in the best interest of all parties.”
The Bill is supported by Federated Farmers and the NZ Bankers Association and will be introduced to the House soon.
Federated Farmers’ six-monthly banking surveys have shown while most farmers are satisfied with their banks, satisfaction has been slipping and the number feeling under pressure has been rising.
Federation vice-president and commerce spokesperson Andrew Hoggard said there is no substitute for good communication.
“We urge farmers and their banks to keep in close touch and build positive relationships in good times and bad, with or without farm debt mediation.
“Although we hope this legislated farm debt mediation won’t have to be used very often, it will have done its job if it helps banks and farmers find enduring and sustainable solutions before it is too late.”
Meantime, O’Connor encourages farmers and lenders to have their say on the bill during the select committee stage.
The scheme will apply to all secured lenders, including non-bank lenders.
