Farm Debt Mediation Bill

The Farm Debt Mediation Bill (No. 2) is a proposed law change. If it becomes law, it will require secured creditors who lend money to farmers to offer mediation to farmers if they default on payments, before taking enforcement action. Find out more about the Bill.

Make a submission

The Primary Production Committee is calling for public submissions on the Farm Debt Mediation Bill (No. 2). Submissions are open until 7 August 2019.

For farmers struggling with debt

Risks that are outside of farmers' control (like climate change, biosecurity threats, and international market changes) can affect their ability to pay debt on time. The Farm Debt Mediation Bill aims to help farmers struggling with debt. It aims to provide fair, timely resolution of issues around farm debt between creditors and debtors.

If the Bill is approved, it will create a mandatory mediation scheme. The scheme will mean secured creditors will have to offer mediation to farmers who default on payments. The creditors will have to offer mediation before they take enforcement action on any debts.

Farmers would also be able to request mediation at any time.

You can read the Bill on the New Zealand Legislation website.

When we expect the changes to happen

We expect the Bill to become law before the end of 2019. Farmers and lenders will have the chance to have their say on the Bill during the Select Committee stage.

When we expect the mediation service to start

We expect farmers will be able to access farm debt mediation from 1 October 2020.

Objectives of the Bill

The objectives of the Bill are to:

  • support farmers in financial distress in their involvement with secured creditors
  • make it possible to explore options for turning around a failing farm business
  • allow a farmer with an unviable business to ‘exit with dignity’.

How mediation would work

The Ministry for Primary Industries (MPI) would administer the scheme and:

  • ensure the efficient operation of the scheme (like setting rules and issuing certificates)
  • oversee mediators
  • ensure farmers have ready access to the financial support and business planning support they need
  • raise and maintain awareness of the scheme
  • monitor, evaluate, and report on the effectiveness of the scheme, with a view to continuous improvement in the scheme's performance.

Farmers and creditors would have up to 60 working days to complete the mediation process, unless both parties agree to extend.

If lenders don't want to take part in mediation, then the farmer can apply for a Prohibition Certificate. This means the lender won't be able to take any enforcement action on the debt for 6 months. After 6 months, the lender would need to offer mediation before enforcement can be taken.

Who could use the mediation service

The mediation scheme will apply to farm businesses engaged in agriculture, horticulture, or aquaculture. It will also apply to farm businesses engaged in any primary production activity done in connection with these.

What loans it covers

The scheme will apply to loans that are secured against farmland, farm machinery, livestock, and harvested crops and wool.

The scheme doesn't cover debt linked to lifestyle farms, forestry, wild harvest fishing, and hunting or trapping of animals.

Fees and charges

We expect each mediation case to cost around $6,000. This would be split between the lender and the farmer.

Find out more

Policy and design decisions (from December 2018)

Legislation design decisions (from June 2019)

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