Farmers who are down on their financial luck will be able to go to mediation before being forced into receivership by banks.
A Farm Debt Mediation Bill will soon be introduced into Parliament which will require creditors to offer mediation to farmers who default on payments before they take any enforcement action.
The bill arises out of concern there is a lot of debt in the primary sector. Last year agriculture debt stood at $62 billion, with dairy $41.5b, sheep and beef $14.1b and “other” including horticulture $6.3b. Four years ago dairy farmer debt was $34b.
In announcing on Monday that the bill had been given the go-ahead by Cabinet, Agriculture Minister Damien O’Connor said farm debt had ballooned out by 270 per cent compared with 20 years ago.
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“Farmers are especially vulnerable to business down-turns as a result of conditions that are often outside their control, like weather, market price volatility, pests and diseases like Mycoplasma bovis.”
The estimated cost to set-up the scheme is $350,000, and the estimated annual cost for administering the scheme is $250,000 to $300,000. This will be met from the existing MPI baseline.
It is expected each case of mediation will cost about $6000. This will be split between the lender and the farmer.
Federated Farmers and the Bankers Association both back the bill. Neither could provide statistics for the numbers of farmers who go into receivership every year.
A similar private member’s bill in the name of NZ First primary spokesman Mark Patterson was introduced last year but was withdrawn at select committee stage because it was considered unworkable.
O’Connor said the bill was “pragmatic”.
“The guts of it is early intervention – where either the farmer or the bank have an ability to go and seek mediation, which is a far better option than forced foreclosure,” he said.
The genesis of the bill goes back to the 1990s when NZ First had attempted to introduce a similar measure. O’Connor said Patterson’s bill had been reworked as a Coalition Government piece of legislation.
One of the reasons why the bill failed to advance last year was the mechanism proposed came too late in the process, by which time a farmer was already under water.
Last year the Reserve Bank warned that while financial stress in the dairy sector was falling, a small number of farmers were struggling to pay down debt.
The numbers of farmers who were at least 90 days overdue with their loans was 2 per cent out of 8059 owner-operators and 3911 sharemilkers.
That figure was an improvement on the worst period for non-performing loans in 2011, when it had risen to 4.7 per cent.
Two years ago 12.7 per cent of dairy farms were “potentially stressed” but that has dropped to 8.6 per cent.
Real Estate Institute spokesman Brian Peacocke said it was difficult to gather accurate statistic

A trip to the underworld of debt collection, where bankers team up with ex-burglars and few rules apply

Bad Paper is a riveting exposé, a moving story of an unlikely friendship, and a gritty narrative of how scrappy entrepreneurs profit from our debts. Jake Halpern introduces us to a former banking executive and a former armed robber who become partners and go in quest of “paper”—the uncollected debts that are sold off by banks for pennies on the dollar. As Halpern shows, the world of consumer debt collection is a wild and unregulated shadowland, where operators may misrepresent a debtor’s situation, make illegal threats, and even lay claim to debts that are not theirs to collect in the first place. It is a realm of indelible individuals who possess a swagger and vocabulary that even David Mamet could not invent. Halpern follows his collectors as they intimidate competitors with weapons, manage high-pressure call centers, and scheme new ways to benefit from American’s debt-industrial complex. He also explores the history of collection agencies and reveals the human cost of a system that leaves hardworking Americans with little opportunity to retire their debts in a reasonable way. The result is a bravura work of storytelling that is also an important consciousness-raiser.