Debt mediation Bill will help hard-pressed farmers — O’Connor

Farm debt has risen 270% during the past 20 years and is now at least $62 billion, says O’Connor.

The bill will create a new compulsory mediation scheme to support farmers in financial distress in dealings with their lenders.

“The Farm Debt Mediation Bill will require creditors to offer mediation to farmers who default on payments before they take any enforcement action,” he told Rural News.

O’Connor, who is also Minister of Rural Communities, says farmers have been doing it tough in recent years due to rising levels of farm debt and there is a hefty power imbalance between farmers and lenders.

“Farmers are especially vulnerable to business downturns as a result of conditions often outside their control, like weather, market price volatility, pests and diseases like Mycoplasma bovis.”

He says farmers who run a family businesses often don’t have the resources to negotiate their own protection when dealing with lenders. 

“That’s where this piece of legislation fits in.”

O’Connor says the Bill is pragmatic in being focussed on early intervention.

He points out that farms are often much more than a business.

“They are the centre point for a family and for a community. And the failure of a farm business can lead to the farmer and their family losing both their business and their home.” 

O’Connor claims the Bill will also help to acknowledge and support mental health problems which can be associated with farm debt issues. It will create opportunities to improve a business and farm practice before they hit a crisis point.

“This legislation will give us a system of mediation where a bank and a borrower come together and work out a way of moving forward or find a way for a farmer with an unviable business to exit with dignity. It’s a process that will ensure a fairer system of justice for those in financial distress.”

O’Connor says the scheme has broad support from lenders, including all major banks, the New Zealand Bankers Association and Federated Farmers.

He expects each case of mediation to cost about $6000 split between farmer and lender -- about $3000 each. The next step will be a second reading of the Bill in Parliament, with changes resulting from the parliamentary select committee process. A report to Parliament is due on the Bill on November 4.

“We are aiming for the Bill to pass into law before the end of the year, with [most of its content] coming into effect in February 2020,” O’Connor said.