Talk option for farmer debt

TALK can be cheaper. That’s the principle behind the Victoria Government’s Farm Debt Mediation Scheme that commenced on 1 December 2011. New Victorian legislation means that banks and other creditors must offer to undertake mediation with farmers before they can initiate debt recovery.
A similar scheme has been operating in New South Wales since 1994, and has seen mediation produce a settlement between farmers and their creditors in more than 70 per cent of cases.
While Victoria has seen the welcome return of good rain over the past year, many producers continue to labour under large debts as a result of the impact of more than a decade of drought.
This scheme provides those farmers with the security of knowing that, in the event that they are struggling to service their debts, banks and other creditors cannot simply walk in and take over their property. The scheme will require creditors to offer farmers an opportunity to sit down on equitable terms and negotiate an agreed outcome with the help of an experienced and impartial mediator.
The new legislation applies only to farm mortgages, covering a farm (or part of a farm), farm machinery or a water share (within the meaning of the Water Act 1989). The legislation makes it mandatory for creditors to offer to mediate with farmers before initiating debt recovery proceedings on farm mortgages. While farmers are not obliged to participate in mediation, if they do not, a creditor can initiate debt recovery.
Under this scheme, a farmer has 21 days from the date of the offer to mediate to respond. If the farmer does not respond, or refuses mediation, a creditor can commence recovery action. While a farmer may also initiate a request for mediation, a creditor is only obliged to mediate if a farmer is in default.
Not responding to an offer to mediate will enable a creditor to apply for an exemption certificate from the Victorian Small Business Commissioner. If granted, this certificate will last at least three years, exempting the creditor from having to offer mediation in the future.
If farmers are planning to be away from their farm at a time when they believe there is a risk, a creditor may seek to commence recovery action, then it is very important to ensure someone is checking their mail.
The scheme is administered by the Department of Primary Industries (DPI), with mediation services being arranged by the Small Business Commissioner. If a farmer agrees to mediate, a creditor will not be able to commence recovery action until mediation has concluded to the satisfaction of the Small Business Commissioner. The Small Business Commissioner is an independent office established by the Victorian Government to assist small business – including farm businesses.
The mediator acts as a neutral and independent person, and works to assist a farmer and creditor reach a mutually agreed resolution about current and future debt arrangements. Mediations will generally be conducted within six weeks of being brought before the Small Business Commissioner and can be held in regional Victoria, if this suits the parties.
Participating in farm debt mediation gives all parties, farmers and creditors, the opportunity to sit down and seek to resolve matters.
Importantly, farm debt mediation is low-cost. The cost of mediation is $195 per session for each participant. This is significantly lower than market price, and is subsidised by the Victorian Government. Parties are responsible for their own costs in preparing for and attending mediation.
There are ways other than court to settle farm debt issues with creditors, but it is important that farmers seek information sooner rather than later.
For more information about farm debt mediation, call the DPI Customer Service Centre on 136 186 or visit www.dpi.vic.gov.au/mediation.