John Forrest (Mallee, National Party) Share this | Link to this | Hansard source

On 17 November last year I reported to the parliament my concerns about a debt tsunami raging across my electorate. After 10 years of drought and drastic water shortages for irrigators, the impact is devastating. Six months have rolled on since then, and still the tsunami rages. The resolution I am putting for consideration today requests some support from members towards putting proper protocols in place for commercial lending. We have very good protocols in place for mortgage lending. That comes from the fact that Australians take great pride in having a home, and we need to make sure that if they get into trouble they are treated properly. Primary producers, particularly, live on their farm; it is their home. Some of these impacts, of course affect other businesses as well as primary industry, but I am particularly focused on the primary production sector here with this recovery.

One of the things I have noticed is that many of my constituents have interests on both sides of the river—my constituency in Victoria and over the river in New South Wales, particularly in the electorate of the member for Farrer. In New South Wales, state legislation exists that requires compulsory mediation when a borrower gets into trouble. This forces both parties to sit down together in a non-adversarial environment. It is very good for borrowers, because sometimes they are in denial about how much difficulty they are in. It encourages them to come to grips with the shocking reality that they may lose their farm. It is working very well in New South Wales, and Queensland has similar legislation. In Victoria and South Australia it does not exist, but I think it is prudent. The banks I have had discussions with do not necessarily like it, but they would not create a fuss if the arrangements that exist in New South Wales and Queensland existed in Victoria and South Australia, which is where I am hoping this resolution takes us as a chamber.

The Commonwealth cannot implement any necessary legislation, because we only have corporate powers, and most farming operations are family partnerships and conventional business arrangements. It is necessary for the states of Victoria and South Australia to initiate legislation—it is a very simple thing to do—to mirror the New South Wales model. I am hoping that government members who might speak on this would lend their support to encourage a discussion through COAG to have the legislation that exists in New South Wales mirrored in Victoria.

Sadly, I have seen some very bad examples of how lenders can behave. Sometimes they are led to frustration because borrowers are in denial and are putting the correspondence they are receiving on top of the fridge, hoping it might go away. The tragedy is that it will not; it needs to be addressed. We have put rural counsellors in place right across rural Australia to assist. A debt mediation process would make the process much more dignified, particularly for the borrower.

I have spent the last 16 years of my career in this place standing in the breach to provide moral support to my constituents. There is a new case two or three times a week of people pleading with me just to stand with them for moral support. Some of them have been subjected to some very unsavoury practices by lenders. I am not a bank basher. We need the banking industry to be there so we can have productive growth for the nation; all I say to the banks is that there is a much better way than to force the legal process to mortgagee in possession and fire sales that sell up farming properties. It is like a treadmill when there is a fire sale to sell a farm at just enough for the bank or the lender to get the money that they need—I have had some shocking examples.

But over all that time I have put together a list of the good guys. I have a particularly good working relationship with the ANZ and a particularly good working relationship with Westpac, both of which behave as honourably as they can while making the point, and rightly so, that they are entitled to have the money that has been borrowed repaid. I say to them, ‘Yes, that’s true if there is a default—at a commercial interest rate but without an exorbitant penalty rate.’ Those two lenders behave with consideration and address the resolution of the difficulty with a kind of commercial reality.

I have a provisional list and currently I have disputes raging with the National Australia Bank, the Commonwealth Bank of Australia and Suncorp Metway. They are not on my bad guys list, subject to them hearing my message and my plea to treat my constituents with dignity. In that contribution on 19 November, I warned these lenders: ‘If you treat my people badly, it’s the same as treating me badly.’ I warned them I would name and shame them in this place if I saw an example of what I dealt with that day in November.

The people who win the prize for the bad dude lenders in the nation are Rural Bank of Australia. This bank has emerged from what was Elders bank. It is now 60 per cent owned by Bendigo Bank, which is a community bank owned by its depositors—

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

I’ve got one!

John Forrest (Mallee, National Party) Share this | Link to this | Hansard source

Yes, we all have them now. And 40 per cent is owned by Elders themselves. There was a very bad example of absolute brutality and bullying of a constituent of mine, whose name I will protect—I do not want them exposed. I have to say that this bank has a mortgage collection officer whose name is Malcolm Sparrow, who is the worst piece of work I have ever struck. I have had 17 years of association with this dilemma and he is the worst person I have ever struck. I will never forgive him for what he has done to my constituents. I drove 15 hours out of my way to meet up with him and the CEO of Rural Bank. I drove all the way to Murray Bridge and spent the whole day there to plead with them that there was a better way to resolve the difficulty—for them to get their money but leave my constituent with some capacity to retain a small amount of equity he had in the property. But, no, this bank knew better. It ignored my advice. I express my absolute disappointment in the CEO, a man by the name of Paul Hutchinson, who was impotent in bringing Malcolm Sparrow under control.

What this bank did was use a shelf company that my constituent had there for future use. It was a proprietary limited company and was not even trading, and yet they used that to get around the normal processes they have at their disposal through the court, and they appointed a liquidator. That property, a magnificent farming operation with a good crop on it last year and some rain, ended up being sold for half its commercial value, which leaves my constituent and his parents in a desperate situation and me with the problem of trying to get them some Centrelink support. I am not having that anymore. I am naming and shaming the Rural Bank of Australia.

I know they are busy. They have been extremely busy in the member for Barker’s electorate on the South Australian border outside my electorate, and I am advised that there are five cases where Malcolm Sparrow is using his wheelbarrow bully tactics in the member for Farrer’s electorate. I warn him: if you try those tactics again in my constituency, I will tell the people of Australia that this is the worst bank of all to deal with. In all the time I have been in this place I have never used the power that the founding fathers gave us to use privilege, but Malcolm Sparrow is a piece of work. He is a man with no conscience. He is a man who has a vengeful attitude to the resolution of difficulties. My advice to Paul Hutchinson is to have him dismissed—to retire the man before he does any more emotional harm to my constituents or anybody else’s.

The other banks are on my provisional list and, if we can get through the current difficulties and they recognise their need to treat my constituents with dignity and behave honourably, I will put them back on the good guy list. But in the meantime it is provisional and I say all you lenders out there: if you treat my constituents badly, you may as well treat me badly. There is one thing that makes me angry—I think I am the most generous spirited of people; I hope I can get some agreement on that—and that is to see bullying, with big corporations crushing the little people under their ruthless heels. I have had enough of it.

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

I speak in general support of the sentiments that are driving this motion before us today and that I can see expressed in the motion put before this place by the honourable member for Mallee. Under the national credit reforms phase 2, it is the government’s intention to examine hardship procedures and options available to small business, including farmers. So some of what the honourable member for Mallee is putting forward today can be looked at in phase 2 of those national reforms, and that pleases me.

The honourable member and I have in the past had occasion to speak in agreement before the Main Committee on the issue of managed investment schemes, particularly on the inquiry and report that was tabled about how that was impacting on our respective electorates, because there are some similarities between them. We spoke in support of the impact it was having on the farming community—not just the farmers but also the broad farming community. We talked about the issues of regional royalties, local government involvement and a whole range of other issues, and that is still a work in progress with those respective communities. I put on record that the national laws around consumers in phase 1 have been about fairness—that is, making it fairer—for consumers. Consumers in the case that is before the House are farmers and the farming community—that is, the primary production community.

I turn to the issue of the four parts of the honourable member’s motion. I had a little bit of experience in the area when I was in legal practice. I was in a country legal practice and often used to deal with people from the primary production sector and from forestry. There were not as many laws then, but I acted as an advocate for them beyond being a legal advocate in relation particularly to the banks and the lenders and all the associated issues. Also, I was a member of the New South Wales rural authority, so I had some experience there. The honourable member would know at the New South Wales rural authority does. We used to have the rural banks, and he would remember that. So I have a bit of experience in that area, and, like the honourable member for Mallee, I get hot under the collar about lenders who lean on families, on farmers and on small people that do not have the capacity to fight back. Also, if they are experiencing financial hardship, they are already in trauma and then have to deal with the lenders, and being prevailed upon can make it extremely difficult for them.

On debt recovery itself, across the primary production sector, in the first part of the motion, the honourable member talks about the Australian economy and the consequence of more than seven years of drought. We know that the drought over the last number of years has had a really serious impact right across Australia, but that also brings its own attendant difficulties. I can also say that in my area there have been other climate change events, with floods and frosts and hail storms which have impacted as well. I did look at some figures from ABARE, and they talk about the debt-servicing ratio for horticultural farms—which I have a lot of in my area—being relatively low, at around 8 per cent in particular areas compared with 7 per cent in other areas for 2006-07. The honourable member talks about the need for debt recovery protocols in commercial lending similar to those that exist for mortgage lending, and I have some sympathy for that and would want to examine that more to make sure that we do not do anything that provides a negative impact.

As we know, some states and territories already provide such coverage for farmers who are in debt. In New South Wales, under the Farm Debt Mediation Act 1994, a creditor must give at least 21 days notice to a farmer of intended enforcement action, and mediation is available under the act. I know that in Queensland there is a Hire-purchase Act. I do not know the situation in other jurisdictions, but that is certainly something we can build on. Under these laws, mediation and the temporary suspension of payments allow the borrower time to negotiate a change to their repayment obligations that will avoid or mitigate the risk of further default. But, again, it comes back to the person being in a position where they feel empowered enough to work through that process. Sometimes we need the advocate, and that is what the honourable member is obviously proposing here tonight for some particular constituents, whereas the motion goes to the general.

Also, with the Code of Banking Practice we know that lenders are subject to the Australian Bankers Association code, and once that is adopted by a bank it becomes a legally binding contract between the bank and its customers for which the institution has to be held accountable. We need to make sure that these codes are implemented. Also, under the consumer hardship provisions, I know that under state and territory regulation all lenders—all—have an obligation to consider an application by an eligible borrower who is experiencing financial hardship for a change in repayment arrangements such as making smaller regular repayments over a longer period of time. I can say to the honourable member for Mallee—and he would know about this—that this is sometimes difficult, again, for those borrowers to actually deal with and have enforced. For many lenders, this obligation is reinforced and extended under industry codes of practice. These are some of the areas that can be looked at again in that second phase that I talked about.

This year, in respect of financial hardship principles, the government requested that banks, credit unions and building societies in particular make a commitment to assist borrowers, and the Treasurer announced in June this year the sign-up of these financial institutions to the principles of a common approach for assisting borrowers facing financial hardship. They are important, and I will turn to (3) and (4) in the time I have remaining. The third principle says:

… supports the concept of compulsory debt mediation prior to lenders exercising their rights to pursue recovery through legal processes …

I do have some sympathy for that and, prima facie, it is something I want to support. Given some of the experiences I have had in this particular sector, I would say we would need to consider that carefully to make sure there is no perverse outcome. But prima facie I am attracted to it. The issue we would have to look at is that some lenders may be more reluctant to lend to farmers if the constraints on legal proceedings are too onerous. But, having said that, my sympathy is clearly with the farmers and the associated farming businesses.

I know that, with the debt mediation process in New South Wales, before a creditor can take possession of property there is a range of things that need to happen. I would also like to commend the work of our rural financial counsellors in debt mediation and debt agreement administration. I have not had an opportunity today to talk with my wonderful local rural financial counsellors and servers and get their take on the motion that is before the House. I have been in conversation with them over the time that I have been a member and they have been able to inform me broadly about extra things that need to happen. Thank you.

Mark Coulton (Parkes, National Party, Shadow Parliamentary Secretary for Regional Development and Emerging Trade Markets) Share this | Link to this | Hansard source

I rise tonight to speak on this motion in support of my colleague the member for Mallee. He has been a fierce advocate for the farmers in his electorate in what has been a very difficult seasonal decade in the Mallee area.

As a rural representative whose electorate’s new boundaries after the last redistribution now cover 40 per cent of New South Wales, I too have an interest in this motion. Largely because of the debt mediation legislation that New South Wales operates under, as a member I do not get the level of extreme cases and brinkmanship between banks and farmers that comes to the member for Mallee, but I am picking up an undertone. I have received some correspondence from some farmers in the Coolah area. They showed me the interest rates they have been paying over the past five or six years. Even with the record low rates of recent times, the minimum rate they paid was nine per cent and, on default, they paid up to 21 per cent—and that was recently. The member for Mallee mentioned that it seems rather perverse that the sector that is most under stress pays an exorbitant rate compared to regular mortgagee holders.

As a farmer myself for more than 30 years, I truly appreciate the relationship between a bank and a farm business. Indeed, I am extremely grateful for the relationship I have had with the different banks I have dealt with in my time before I came here. And while we should not single farmers out as being different to the rest of the community, one of the issues with farming businesses when they get into a tight financial spot is that it is not just about losing your job or about losing your business; it is about losing your home—and quite often there are several family members, mainly across several generations, who are impacted by this. So it is important that the banks, in relationship with farmers, foreclose as the very last resort. I also acknowledge the role of rural counsellors. Unfortunately, we have far too few rural counsellors, but they have done a mighty job over the past decade or so of keeping many businesses afloat and keeping that relationship and the lines of communication between lenders and farmers open.

One of the real problems we face, and in my electorate I do not think I am that far from the crisis that the member for Mallee is facing, is that the increase in property prices to a certain degree has masked an issue that is coming our way. Quite often many farmers are there because the increase in the price of their property has enabled them to stay there with their equity levels. But that is starting to run out and certainly farmers are making the decision now whether they should go. But the real tragedy of this is that it is not just the most inefficient or the poor farmers that get caught up in this level of debt; more often than not it can be the most innovative and quite often it is the youngest. The most vulnerable time for a family farm is during intergenerational change, where, because of the price of land, quite often large borrowings are undertaken to allow the next generation to continue on in the farming career. Once again, people outside farming might say, ‘Why should they be any different to anyone else?’ Farming is highly skilled and you need certain levels of motivation to undertake it as a career. We rely on farmers in this country and around the world. Australian farmers feed 70 million people around the world. If we do not do something soon to keep those younger farmers on the farms, we are going to have a crisis in Australia’s ability not only to feed itself but to feed countries around the world. (Time expired)

Kirsten Livermore (Capricornia, Australian Labor Party) Share this | Link to this | Hansard source

As we have heard, few in this parliament would know more about the reality of drought than the member for Mallee. His region has been living through the most severe and prolonged drought any of us can remember, and we have heard just some of the stories of hardship and distress that have come to him, as the local member, from farmers and their communities as they wonder how much longer they can keep going.

Tonight’s motion asks us to think about what these farmers are going through, particularly when it comes to the attitude and practices of lenders seeking to recover the debts accrued during the long years of drought that brought so much devastation to farming businesses. These debts are substantial. National Farmers Federation figures show that rural debt has increased by 85 per cent since 2002-03, and the debt-servicing ratio has followed a similar upward trend in that time. The NFF warns of the potential for regional land prices to fall should the banking sector withdraw its support of the agricultural sector and aggressively foreclose on rural debt. This was echoed by a farm management consultant in my electorate who said that lenders need to be careful that their actions to recover debt in a region do not drive down the equity of other landholders.

It appears that this caution is not always being heeded in Central Queensland. One grazier, an industry leader, told me that she is aware of instances in Central Queensland of banks being overly aggressive at present in their dealings with farmers. The solution the member for Mallee proposes in his motion is to introduce debt recovery protocols in commercial lending similar to those for mortgage lending and also to require compulsory debt mediation prior to lenders exercising their rights to pursue debt recovery through legal processes.

While the conditions applying to home mortgages may not always be suitable for the kind of debt arrangements farmers need to enter into, because of the differences in the amount of loans an income patterns, there are other measures that should protect farmers just like they protect other borrowers. State and territory regulations oblige lenders to consider an application by an eligible borrower who is experiencing financial hardship for a change in repayment arrangements. The major banks are also subject to the Australian Bankers Association code of banking practice. It would be interesting to know whether the Rural Bank of Australia that the member for Mallee referred to is part of that code. This includes an obligation on the bank to act fairly and reasonably towards their customers in a consistent and ethical manner. Under the code, banks are specifically required to assist with financial difficulties.

The Queensland Farmers Federation and other farming bodies in Queensland such as AgForce and Canegrowers have taken a proactive approach and reached an agreement with a number of lenders on the Queensland Farm Finance Strategy. Among other things, this requires lenders to inform farmers in writing if they are aware that there are financial problems and encourage farmers to take remedial action to resolve their financial problems as early as possible. It also requires lenders to urge farmers and their advisers to identify and develop actions and financial and business goals that will improve their position. The strategy also sets out a framework for resolving financial problems by negotiation and includes a formal mediation process. The banks that have signed up to that strategy include the National Australia Bank, Westpac, ANZ, Suncorp, Rabobank, Bendigo Bank and Bankwest, just to name a few. Given these protections, I am concerned by reports from a local grazier whom I spoke to today, and I remind banks and other lenders of the commitment they have given to treat farmers fairly and work with them to manage their businesses in a way that ultimately benefits both the farmer and the lender. On the face of it, the proposal for compulsory mediation does sound attractive, but we must be wary of possible perverse consequences making it more difficult for farmers to access finance because they are seen as more risky or the restrictions on legal proceedings too onerous. I join with the member for Page in hoping that we can work through some of these problems through the second phase of the consumer credit legislation.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.