Thursday, December 7, 2023

Facing foreclosure, debt mediation ‘took the fear away’

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Federated Farmers is keen to raise awareness of the mediation scheme and help farmers understand how it works.
Xero’s New Zealand country manager, Bridget Snelling, says agri small businesses are also facing historically high wage growth.
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A couple who have been through farm debt mediation say the process was a huge help and released a lot of pressure. 

Facing foreclosure last year, dairy farmers Steve and Carol (names changed to protect their identity) agreed to take part in the Farm Debt Mediation Scheme. 

“Our debt loading wasn’t actually that high – we had about 51% debt to equity ratio – but we weren’t making profits, and it’d been like that for about three years. We’d been through droughts, we’d been through floods, and heaps of other challenges, but the bank was putting the screws on us, putting the pressure on,” they say. 

“So, in the end we went to bank mediation. We were absolutely petrified but our mediator Tony Wilding was so good – he completely took the fear away.”

Run by the Ministry for Primary Industries, the Farm Debt Mediation Scheme gives struggling farmers the chance to work through debt problems with their bank, using independent mediators. 

By law, banks must offer mediation before taking any debt enforcement action against farmers or farm businesses. Also, farmers can ask for mediation at any time.

Steve and Carol say that, leading up to their mediation in November last year, they were under incredible stress and were “at our wits’ end”. 

When the bank offered mediation, they weren’t sure what to expect. 

“The bank gave us a number of mediators to look at, and we chose two or three, and then the bank chose one out of that. Tony came out and saw us before the mediation meeting, so he could find out everything about our situation. 

“He made us feel like decent people when our confidence was really low going into it.

“He could see the big picture and he said, ‘You’re in a very sticky situation with the bank, but look, you’ve got this, this and this option’. He really challenged us to look at our options and he took away that huge mountain of fear.”

The Reserve Bank warned on October 26 that, while defaults in banks’ agricultural lending portfolios are currently low, they’re expected to increase and could accelerate if there is a prolonged period of high costs and low prices.

Federated Farmers is keen to raise awareness of the mediation scheme and help farmers understand how it works, Federated Farmers’ national board spokesperson for banking Richard McIntyre says. 

“We’re urging farmers out there who need it to make use of this scheme, because it brings the parties together to find the best way forward.”  

“It’s about coming up with a plan, which sometimes means it’s a managed exit, or it could be to subdivide a couple of the back paddocks for sale, or sometimes it’s changing aspects of the farm’s management or changing the farm system. 

“Whatever the plan is, you’ll end up in a better place than if the bank auctions your farm off.” 

For Steve and Carol, that agreed-on plan was to look at restructuring the way they run their business. 

Going through mediation has bought them more time to change their system, with less pressure. 

They say any farmers in difficult financial situations shouldn’t hesitate to go through Farm Debt Mediation. 

“Mediation is very, very good. It’s a great process. We want to encourage farmers that it’s really beneficial and much less stressful than you might think.” 

Federated Farmers is hosting a webinar, ‘Farm debt mediation: ask the experts’, at 7pm, November 7. If you or someone you know could benefit, register here

Federated Farmers, New Zealand’s leading independent rural advocacy organisation, has established a news and insights partnership with AgriHQ, the country’s leading rural publisher, to give the farmers of New Zealand a more informed, united and stronger voice. Feds news and commentary appears each week in its own section of the Farmers Weekly print edition and online.

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