Farming groups have welcomed a proposed law that will force banks to offer mediation before taking action against farmers in financial distress.
The Farm Debt Mediation Bill will require creditors to offer mediation to farmers who default on payments before they take enforcement action. It would also allow farmers to initiate mediation.
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Federated Farmers Vice-President and commerce spokesperson Andrew Hoggard said it was a good move.
"Farmers are especially vulnerable to business downturns as a result of conditions that are often outside their control, such as the weather, market price volatility, pests and diseases like M bovis," he said.
"Farmers are also facing a raft of policy changes, including around freshwater management and climate change, and these could apply even further pressure, " said Hoggard.
The agricultural sector has nearly $63 billion of debt and Federated Farmers six-monthly banking surveys have shown that while most farmers are satisfied with their banks, satisfaction has been slipping and the number feeling under pressure has been rising.
Hoggard said while the legislation was a useful tool, he hoped it wouldn't have to be used very often.
"There is no substitute for good communication and we urge farmers and their banks to keep in close touch and build positive relationships in good times and bad, with or without farm debt mediation."
Meanwhile, Rural Women New Zealand (RWNZ) has also welcomed the proposed legislation.
"RWNZ has been working with the Ministry of Primary Industries and others to progress this much needed service since our submission on the Farm Debt Mediation Bill originally proposed by Mark Patterson MP," said National President, Fiona Gower.
She said rural communities were adversely affected by the imbalance of power between banks and farmers and the bill would hopefully ensure farmers are treated fairly by financial institutions.
"Financial control is not black and white for farmers due to circumstances beyond their control and due to this complexity, creating a stand alone bill for farmers will provide fair treatment to all involved," said Gower.
"Mediation between farmers, their families and banks will only be good for rural communities."
Agriculture Minister, Damien O'Connor said the proposed law would be introduced to Parliament soon.
"This bill supports the mental, emotional and financial wellbeing of farmers and farming families who find themselves in financial strife," he said.
"I encourage farmers and lenders to have their say on the bill during the select committee stage."