The banking royal commission is being urged put an end to the patchwork of state-based mediation schemes for agribusiness customers and establish a single national body for working through disputes with banks.
The move would deliver the time-poor inquiry headed by Commissioner Kenneth Hayne an easy win, with the current state-by-state system enjoying few supporters.
National Farmers Federation policy director Tony Mahar said the existing system, which only guaranteed farmers in Victoria, NSW and Queensland with access to a formal mediation service, was inadequate.
“It’s fragmented and unhelpful, what we need is a national approach for farmers and financial institutions.”
The Hayne royal commission is believed to be aware of the disjointed approach to mediation, drawing attention to the problem by dedicating two pages of its recent report on features of the Australian financial system to the issue, including the $68.6 billion in farm debt held by the big four banks.
The plights of farmers were not however specifically mentioned during the opening statements made by Commissioner Hayne and senior counsel assisting Rowena Orr, which signaled the royal commission would seek to explore misconduct in the home loans and consumer credit segments.
The idea of a national body has failed to get traction and was last seriously considered in 2014 when a drought and the ban on live exports conspired to put many farms under. Nationals leader Barnaby Joyce compelled the banks to attend a crisis meeting at the time and sketch out a workable solution.
Mr Maher said that a great deal of work had been done on the subject over the years, it had broad support among stakeholders and it was something the government should be able to deliver.
The establishment of a national farm debt mediation scheme was most recently recommended by the select committee on lending to primary production customers, which delivered its final report in December 2017.
It recommended a scheme based on the NSW model with a $10 million ceiling on loan amounts.
Australian Banker’s Association CEO Anna Bligh has also thrown her support behind a nationwide mediation scheme to resolve issues that crop up between farmers and their banks quickly and fairly.
“It shouldn’t matter whether you’re a farmer in Cootamundra, NSW or the Western Australian wheat belt you should be treated equally and have the same access to financial mediation” Ms Bligh said.
The newly established Australian Financial Complaints Authority (AFCA) which replaces both the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT) will have a ceiling for loans under dispute of $5 million.
This is a significant increase from the ceiling of $2 million FOS was previously subject to. Data from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) shows that a ceiling of $5 million would cover 99 per cent of loans in the rural sector.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell has been critical of the banks for trying to cap the size of loans defined as small business loans and therefore eligible for mediation rather than more expensive legal proceedings. Mr Mahar said if agriculture exports were to reach a target of $100 billion per year then processes needed to be established for when farms get into difficulty.
“We recognise that banking and farms are always going to be partners and nationally consistent approach will underpin this,” Mr Mahar said.
In the meantime, while you wait for the Government to nationalize the Mediation system, if you need help now, contact us with the form below to arrange for a private and confidential free consultation as to whether private mediation can help you with your Farm or Banking debts.This article was first published by Australian Financial Review Author: James Frost
NY Chalmer Tuesday, 10 September 2019 08:55 Comment Link
this is absolutely essential - why is it so difficult to use common sense and do it. The farm financial counselling service in WA is useless - there was no offer of mediation and the most important factor that affects farmers - unreasonable interest rates is always off the table.Report