Farm Debt Mediation Bill

Farm debt mediation.  Something that has been looked at in the past, but never quite given the light of day.

Now, mid question-time in parliament, and whilst the Government was fielding questions about the Mycoplasma bovis calttle disease outbreak, Winton Peters floated the possibility of a Farm Debt Mediation Bill, requiring mediation between lenders and farmers as a mandatory step before lenders could exercise their legal right to call in farm debt.  With that, the Farm Debt Mediation Bill was introduced and passed its first reading unanimously last week (National supported the Bill at its first reading, but warned it wants a review of parts of the Bill at select committee).

So what does the Bill propose?  The receivership process in the Receiverships Act 1993 would be deferred for 10 days following compulsory agricultural debt mediation.  If a farm lender gives notice of an intention to appoint a receiver, the farmer will have 10 days to nominate a mediator (from a list of accredited mediators).  Mediation is intended to achieve agreement between the lender and farmer about future financial relations, and provide the farmer an opportunity to avoid losing the farm.

There has been historical resistance from banks and the farming industry alike to the introduction of a mediation scheme.  The last time mediation was considered was in 2015, when milk prices were low, and many dairy farms were carrying a high debt burden.  At that time there was opposition from the New Zealand Bankers Association, and Federated Farmers, citing a good relationship that already existed between farmers and their bankers, and the scheme adding unnecessary delays and costs associated with another level of ‘red tape’, with no guarantee of a favourable outcome for farmers.

Conversly, there have been positive reports on similar schemes operating across the Tasman.  In some Australian States, farm debt mediation schemes have operated for some years now, and similar legislation has recently been passed.  The schemes have allowed farmers facing burdensome debt some time to agree a way forward with their bankers.  Australia has reported high satisfaction rates from both famers and lenders.

So has the time come for a farm debt mediation scheme in NZ?  Farmers are definitely exposed to environmental and financial shocks (such as milk prices, or diseases affecting animal health like Mycoplasma bovis), and compulsory mediation could help to protect farmers losing what, in most cases, are often intergenerational family assets.  On the other hand, is this a scheme that is really necessary, because farmers already have a positive relationship with their lenders, and there are already avenues available (like the Banking Ombudsman and the Commerce Commission) for disgruntled farmers to turn to?