Rural Finance Reform Bill open for public comment

Rural Finance Reform Bill open for public comment

An inquiry into a Private Member’s Bill to reform the rural finance sector, introduced by the Federal Member for Mayo Rebekha Sharkie, is now open for public submissions.

The Banking Amendment (Rural Finance Reform) Bill 2019 was referred to the House of Representatives Standing Committee on Economics back in July with the first public hearing held this week.

“My Private Member’s Bill is the same legislation I introduced in the 45th Parliament and aims to protect small farm properties valued at under $5 million from ‘arbitrary and draconian’ lending practices,” said Rebekha, Centre Alliance’s Spokesperson for Agriculture.

“Back then I introduced the legislation as a direct response to the Government’s own inquiry into banking and the rural sector and in light of the findings of the Banking Royal Commission I felt it was vital to keep the legislation before the parliament.

“I welcome the Committee’s decision to open the inquiry to the public and I urge primary producers and all stakeholders with an interest in protecting our mum and dad farmers from unfair banking behaviour to put in a submission.”

For the purposes of the inquiry, Rebekha has also been made a supplementary member of the committee which is chaired by Liberal MP Tim Wilson with Labor MP Andrew Leigh the Deputy Chair.

The first public hearing was held on Wednesday with representatives from the Australian Small Business and Family Enterprise Ombudsman, the Australian Financial Complaints Authority, the Rural Financial Counselling Service and the Australian Banking Association providing comment.

“The first hearing was robust and I welcome the feedback from participants,” Rebekha said.

“There were some comments that some of the content of my Bill would be covered by the new Banking Code of Practice.

“Whilst I acknowledge that opinion, I maintain that the Banking Code of Practice is not enforceable and we need strong legislation that ensures consequences for poor banking practices.

“The Banking Royal Commission and recent banking scandals have thrown into sharp relief the need for reform in the financial sector.

“My Bill addresses the real problems affecting the rural finance sector and seeks to provide protections for our mum and dad farmers whose businesses are also their homes.

“This legislation offers a reasoned, measured approach to lending and to levelling the playing field between lender and lendee because we want to make sure banks are still willing to lend money to farmers.”

The Banking Amendment (Rural Finance Reform) Bill 2019 seeks to take a measured approach to level the playing the field by:

  • Requiring financial institutions (including banks, building societies and credit unions), to provide simple, one-page summaries of the clauses that may trigger a non-monetary default by the borrower;
  • Prohibiting institutions from unilaterally undertaking a valuation of security to a loan;
  • Requiring institutions to provide six months’ notice before seeking to unilaterally vary conditions of the loan, except where it is a change in the money payable by way of a reference rate or it is to the borrower’s benefit, and except where the borrower has substantively breached the loan agreement;
  • Requiring institutions to provide notice and request to meet with the borrower at least six months prior to the expiry of the loan;
  • Prohibiting the use of catch-all ‘material adverse change’ (contingency) provisions, except where they relate to alleged fraud or criminal misconduct;
  • Requiring institutions to provide a minimum of ‘90 business days’ notice where a loan is not going to be extended or renewed;
  • Requiring institutions to inform the borrower about their rights to external dispute resolution when the borrower receives a default notice from the bank, or when the borrower is in financial hardship and is declined assistance from the bank, or when the institution refuses to renew or extend the borrower’s loan.

“I am also convinced that the impotence that farmers feel when faced with arbitrary and draconian decisions about their loan agreement is detrimental to the mental health of our rural community,” Rebekha said.

“This issue causes more farmers to take their lives than any other so action needs to be taken.”

The deadline for submissions on Bill is Friday, 28 February 2020.