New scheme to help farmers in financial stress moves forward

A new scheme that would force banks to offer mediation before taking action against farmers in financial distress is a step closer.

The Farm Debt Mediation Act became law on 13 December 2019 and will start operating in July.

It requires creditors to offer mediation to farmers who default on payments before they take enforcement action.

It would also allow farmers to initiate mediation.

From next week the Ministry for Primary Industries (MPI) will start considering applications from mediation organisations wanting to take part in the scheme.

"We've already heard from leading mediation organisations that are interested in participating. 

"If an organisation is approved, they will then make sure their mediators are trained for the new scheme," said Karen Adair, MPI's deputy director-general Agriculture and Investment Services.

Adair said the scheme would provide a way forward when a farm business comes under financial stress. 

"It will ensure a fair mediation process takes place with an independent, neutral mediator and all the key people around the table," said Adair.

Farming groups had welcomed the new scheme when it was announced in 2019.

"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," said Federated Farmers vice-president and commerce spokesperson Andrew Hoggard.

"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.

Rural Women New Zealand (RWNZ) were also pleased with the new scheme.

National president Fiona Gower 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. 

Two organisations, the Arbitrators' and Mediators' Institute of New Zealand and the Resolution Institute, have advised MPI they are intending to apply to be Approved Mediation Organisations under the new legislation.