Banks have put some farmers into default for falling only $10 behind on their loans or missing a payment by just a couple of days, a parliamentary hearing was told on Tuesday.
Sydney barrister Peter King, who has represented more than 50 farming customers in disputes with banks, cited these instances of "technical default" as part of a wider pattern of poor treatment of farmers by banks, which he believes should be investigated through a royal commission.
Bank customers also told the hearing in Sydney of the severe emotional strain placed on farmers and communities by bank repossessions of property, including one case of severe self-harm.
Brett Fallon, who previously owned a cane farm in Queensland and was presented to the committee, described outside the hearing his descent into financial and emotional strife after his overdraft was terminated and punitive interest rates were applied to other loans. Mr Fallon said after months of anguish he had set himself on fire.
Mr King told a parliamentary inquiry into impairment of customer loans on Tuesday he had come across repeated cases of farmers being forced to sell up their farms after banks changed the terms of their loans, which in some cases forced customers into default.
Among his cases against banks, customers had "often" been put into default because the bank had re-assessed the loan-to-valuation ratios, which he described as "particularly troublesome".
He also said that in some cases when customers were transferred to another lender – such as when ANZ Bank bought a book of Landmark rural loans in 2010 – there were "technical" breaches of covenant that resulted in default.
"In those cases, I observed occasions where technical breaches of covenant occurred, sometimes in cases where there had been cases of loans of several hundred thousand but late by two days, interest payment default in a $400,000 overdraft account over by $10. That's sufficient to bring the whole arrangement to a halt, it has been in some cases," he said.
He argued banks had adopted "anti-competitive tactics", and engaged in "misleading and deceptive conduct" towards farmers.
"The circumstances warrant the appointment of a royal commission into the banking industry to determine what if any changes should be made to the Corporations Act, the Banking Act, the Australian Consumer Law, and the National Credit Code, to address these justified public concerns," Mr King said.
In response, committee member, retiring MP Phillip Ruddock, asked Mr King whether the inquiry should also have powers to mount a "forensic investigation" and to provide relief for customers, who Mr Ruddock said had been "abused" by banks.
The committee was also presented with the evidence of the severe emotional strain created by disputes between banks and farmers, including the story of Mr Fallon.
Much of the discussion on Tuesday focused on ANZ, which has faced legal fights with farmers after its 2010 purchase of loans and deposits from Landmark Financial Services from AWB.
ANZ has conceded it made mistakes in how some customers were treated after it bought Landmark, with deputy chief executive Graham Hodges saying in November there were "cases where we should have done a better job talking with customers". Mr Hodges also told the inquiry in November it only repossessed properties after monetary defaults and after "extensive" work with customers.
The bank put a moratorium on farm repossessions in drought-affected areas in late 2014.
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Source: The Sydney Morning Herald