Proposed Farm Debt Mediation Bill would force lenders to go easy on farmers

A proposed law would help farmers in financial distress by forcing lenders to offer them mediation before taking any enforcement action. 

The Farm Debt Mediation Bill has been proposed by the Coalition Government. It's an idea that was first cooked up by New Zealand First MP Mark Patterson. 

As the party's primary industry spokesperson, Patterson said when a farmer is in financial distress, a system of mediation could help find solutions and avoid property foreclosure.

"It offers a fairer system and is in the best interest of all parties."

Patterson withdrew his Farm Debt Mediation private members' Bill late last year, and it's been reported he only did that when the Coalition Government indicated it would introduce its own collective one. 

The new Bill was approved by Cabinet on Monday, and aims to help farmers who operate a family business and "often don't have the resources to negotiate their own protections when dealing with lenders". 

New Zealand First MP Mark Patterson.
New Zealand First MP Mark Patterson. Photo credit: Getty

Agriculture Minister Damien O'Connor said the failure of a farm business can "lead to the farmer and their family losing both their business and their home". 

"For many rural communities the failure of one farm can have a ripple effect through those communities and the regional community."

O'Connor said total farm debt in New Zealand is $62.8 billion - up 270 percent on 20 years ago. 

He said farmers are "especially vulnerable to business down-turns as a result of conditions that are often outside their control, like weather, market price volatility, pests and diseases like Mycoplasma bovis". 

Mycoplasma bovis is the biggest biosecurity response New Zealand has seen in decades and the Government is spending millions of taxpayer dollars trying to get rid of it.

Agriculture Minister Damien O'Connor.
Agriculture Minister Damien O'Connor. Photo credit: Newshub

O'Connor said: "The guts of it is early intervention - where either the farmer or the bank have an ability to go and seek mediation, which is a far better option than forced foreclosure."

He said the proposed law has the support of Federated Farmers and the New Zealand Bankers Association. He said the Bill would be introduced to Parliament "soon".

"This is great progress on an issue I have always personally supported. This Bill supports the mental, emotional and financial wellbeing of farmers and farming families who find themselves in financial strife.

"I encourage farmers and lenders to have their say on the bill during the select committee stage. The scheme will apply to all secured lenders, including non-bank lenders."

The Government has already proposed measures to protect vulnerable people from loan sharks by not allowing them to charge interest and fees larger than the loan itself.