Bill to shut gate on draconian farm lending practices
Posted February 26, 2018
A Private Member’s Bill seeking to protect small farm businesses from “arbitrary and draconian” lending practices has been introduced by the Federal Member for Mayo, Rebekha Sharkie.
The NXT Spokesperson for Agriculture lodged her Banking Amendment (Rural Finance Reform) Bill 2018 in the Lower House this morning in response to a Federal Parliamentary report released late last year on lending to primary production customers.
“For too many years Parliament has held hearings and released reports on how to help primary producers who have lost everything because of draconian bank lending practices, and nothing has been done,” Rebekha said.
“There are a lot of Government Members who put on Akubras when they travel to the regions but they do very little to assist. They are all hat and no cattle.
“It’s time for them to really put mum and dad farmers in regional Australia first.
“This Bill takes on board the recommendations of the parliamentary report and provides some practical provisions to give genuine equity for primary producers who have loans of under $5 million.
“This Bill isn’t asking for special treatments for failing businesses, it’s about giving primary producers greater transparency and more notice when financial institutions make decisions about the conditions of their loan agreements.”
The Banking Amendment (Rural Finance Reform) Bill 2018 seeks to take a measured approach to levelling 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;
- Require 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.
“The fortunes of farmers are often dictated by factors beyond their control,” Rebekha said.
“They buffeted by the hazards of fluctuating international commodity markets, exchange rates and the weather.
“They rely on longer-term profit cycles to pay their creditors and you only have to look at the poor history between the banking and agricultural sector to realise that there is a distinct power imbalance.
“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
“This issue causes more farmers to take their lives than any other so I call on the Government to act on this issue and take up my Private Member’s Bill.”