Patterson MarkFARM DEBT MEDIATION BILLFirst ReadingMARK PATTERSON (NZ First) on behalf of Darroch Ball: I move That the Farm Debt Mediation Bill be now read a first time. I nominate the Economic Development Science and Innovation Committee to consider this bill.Before I begin can I please thank the House for yesterday granting leave for this bill to be introduced. I especially thank the Hon Gerry Brownlee who last week indicated that the National Party was willing to explore farm debt mediation. I would like to think the National Party is a party that has previously been viewed as supportive of farmers and I hope that they will join us in supporting this bill.This bill provides more protection a pause in proceedings a cooling-down period as a firewall to help embattled farmers in an unbalanced power relationship. In 1999 when former New Zealand First MP Doug Woolerton got a farm debt mediation bill through the first reading agricultural debt stood at $11.7 billion. In 2015 when the Hon Ron Mark had a version of this bill in the ballot farm debt stood at $54 billion. Today according to the Reserve Bank agricultural debt stands at $60.7 billion.Of course debt is not just a rural issue—household debt to March stands at $260 billion. The reason why we stress rural debt is because it has unique features. Aside from being large rural debt is concentrated in relatively few hands. Debt is also intergenerational by nature and features heavily in farm succession subsequently underpinning the cornerstone of New Zealand agriculture the family farm.There is another vital dimension in the fact that the farm is also the family home. Farms aren't like an urban store that can simply close the doors and put the closed sign up. In these exceptional circumstances animal welfare is a complicating factor. Cows still need milking. Sheep still need to be fed. This bill is a circuit-breaker that allows those critical animal welfare issues to be considered and best practice to be observed.Of course receiverships also impact farm workers sharemilkers and contractors and have a flow-on effect to the wider community. Should agricultural debt go bad it has the potential to start a domino effect that will cascade through the wider economy. This is all interconnected. The Reserve Bank consistently lists the level of farm debt as a risk factor in New Zealand's financial stability.Recently I sat with a family who had lost their farm in a brutal receivership a farm that had been in their family for 150 years. Their story was one of seeking to grow their business to accommodate the aspirations of their three sons. Through extenuating circumstances their situation led to financial difficulties. Yes this is normal business risk. We don't seek this bill to mitigate against genuine commercial liability. But what that family and several others have outlined is a process where a series of decisions that are made under haste and duress have soon spiralled out of control ultimately left in the hands of unscrupulous secondary lenders. Farmers will do almost anything to retain control of their family farm. Unfortunately this does not appear to be an isolated case. This bill may well have made a difference to them and we hope it will make a difference to many more farming families in the future.We are in the midst of the biggest biosecurity outbreak in New Zealand history. While we don't know the eventual extent of that outcome this bill gives another layer of certainty in uncertain times. While the M. bovis outbreak provides immediate focus the long-term overarching goal of this bill is to provide a more orderly mediation process. The halving of the milksolids price in the 2015 and 2016 seasons shows just how vulnerable we are to market volatility. The recent case—the cases of mis-selling of interest rate swap products—is also another case in point.Dairy farm debt stands at $40.9 billion according to the Reserve Bank. DairyNZ's 2016-17 economic survey puts the average farm-to-loan ratio at 49.4 percent. Term liabilities expressed as per kilogram of milksolids sits at 25 percent. Share milkers' debt-to-asset ratio stood at 53.6 percent and term liabilities at $4.05 per kilogram. Sheep and beef farmers according to Beef and Lamb's mid-season update have debt of $13.6 billion. Even horticulture has debt of $3.8 billion and we recall the recent Psa outbreak that shows just how vulnerable they are as well.We also know that farmers are particularly vulnerable to mental health issues because of isolation. Last year saw a jump in the number of farmers that took their own lives an increase to 22 from 18 the year before. Financial stress in pressured circumstances is potentially a significant trigger. There is real human cost as well as the financial cost in not putting mediation as a prerequisite before receivership.This bill is not to bail people out for poor business decisions. We can however ensure the banks play fair and we note the Australian ones are currently under the regulatory microscope across the Tasman. This bill provides some protection helping to halt predatory and unsavoury lending forced receiverships and making money lenders accountable. I note with interest that Australia has recently enacted similar legislation.As to the bill itself clause 4 proposes a new Part 2 to the Receiverships Act. With agricultural debt" we mean debt from commercial farms forests plantations orchards vineyards fisheries as well as agriculture. The new Part 2 represents a cooling-down period a pause that could see creditors reach an accommodation over debt that can sometimes rush headlong into an emotional rush into receivership.New section 44 inserted by clause 4 means that farmers are given notice that a creditor wishes to appoint a receiver. They have a right to nominate a mediator within 10 business days from a list of accredited persons drawn from the Arbitrators' and Mediators' Institute of New Zealand. The most appropriate administrator for this scheme is the Banking Ombudsman given that all the main banks and their subsidiaries are members of this scheme one that is funded by way of a levy. It is a good model and the bill also enables new section 45 as a fair cost-recovery from any lender whether they are a member of the scheme or not.While the ombudsman scheme and codes that operate are good there is an inadequate compensation cap of just $200000. This is something Federated Farmers have highlighted and New Zealand First agrees with. That is why section 45 also removes the compensation cap to make compensation open-ended as it ought to be. This is important because as the mis-selling of the interest rate credit swaps showed financial loss is often much greater than $200000.As detailed in new section 46 lenders cannot nominate a mediator but must either accept or reject a mediator nominated by the farmer. Where creditors reject the farmer's nominated mediator there is a further process but default resides with the Banking Ombudsman to appoint a mediator on the farmer's behalf.New section 47 of the bill makes it clear that the function of the mediator is to assist the farmer and creditor to arrive at an agreement for current arrangements and for future conduct of financial relations between them. Just doing this requires the lenders to ensure that they have dotted the i's and crossed the t's.New section 48 requires that mediation sessions are conducted with little formality and technicality and with as much expedition as possible. This is a positive development.New section 49 reinforces the confidential nature of mediation while new section 50 prohibits disclosure of information.New section 51 is about ensuring that mediation is between the affected farmer and the creditors unless there is a compelling reason why an agent should speak for the farmer.New section 52 importantly protects the mediator from any liability while new section 53 stipulates that the summary of mediation must be published to affected parties one business day after mediation. Only after 10 working days following a mediated summary of mediation can a receivership process commence.As you can see this bill is about correcting power imbalances that exist between creditors and individual farmers who are under deep financial stress. It importantly removes current compensation caps from the Banking Ombudsman scheme proven by the Commerce Commission investigation into the mis-selling of the interest rate swaps. This bill conveys an important signal to rural New Zealand at a time of great uncertainty and also to the financial institutions. I hope that the whole House will see merit in this and support it through to the select committee where we can make further changes if required. Thank you."