Recommendation 1
3.9 The committee recommends that the Australian
Bankers' Association revise the Code of Banking Practice to require authorised
financial institutions to commence dialogue with a borrower at least six months
prior to the expiry of a term loan.
Recommendation 2
3.10 The committee recommends introducing minimum 90 day notice periods for:
- all
general restriction clauses and covenants (except for fraud and criminal
actions);
- any decision with respect to the rolling over of a
small business loan; and
- any
decision to commence action against a small business customer for default under
a credit contract.
Recommendation 3
3.15 The committee recommends that:
- financiers
be prohibited from making fundamental, unilateral changes to the loan
agreements where such changes are detrimental to the customer;
- provided
that a customer is meeting all terms and conditions of a loan, financial
institutions must be required to bear any costs associated with a variation of
a loan term, if the variation is sought by the financial institution;
- should
a customer suffer any detriment as a result of any unilateral change to a loan
agreement by a financier, that the financier be liable to pay for those losses
and damages.
Recommendation 4
3.31 The committee recommends that the Australian Bankers' Association Code
of Banking Practice be revised to extend:
- the
responsible lending obligations contained in the National Consumer Credit
Protection Act 2009; and
- the
unfair contract term protections for small businesses, as set out in the Treasury
Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015
to primary production loans
of less than $10 million.
Recommendation 5
3.37 The committee recommends that the Australian Bankers' Association Code
of Banking Practice require that financial lending institutions provide farmers
who obtain loans with full copies of signed loan applications and other
relevant documents:
- prior to the submission of the loan application;
- prior to any final loan approval; and
- at any other time as reasonably requested by the
farmer.
Recommendation 6
3.38 The committee recommends that compliance with the Australian Bankers'
Association Code of Banking Practice be included as a term of any loan documentation.
Recommendation 7
3.39 The committee recommends that statutory time limits for legal
proceedings be removed in circumstances where a bank or its agents have changed
the details of loan documents without the customer's knowledge, or the bank or
its agents have acted unethically in the course of the commercial dealings with
the borrower.
Recommendation 8
3.41 The committee recommends that the Australian Bankers' Association
ensure all financial documents provided to its members by a farmer (including
but not limited to asset and liability position statements, cash flow
projections, business plans, valuations, historical and other similar
documentation provided for, or on behalf of, customers either in support of
loan applications or at any time throughout the relationship and at times of
review) be prepared, altered or updated only by the customer and/or their
representatives, and not by the bank or financial institution.
Recommendation 9
3.49 The committee recommends that financial institutions' arrangements for
categorising farmland be revised to ensure that agribusinesses are not financed
through inappropriate loan categories. Recommended measures include:
- facilitating
processes for internal or external dispute resolution of farm debt mediation;
and/or
- introducing
a civil penalty provision for incorrect categorisations by financiers and
providing for corresponding compensation to the farmer.
Recommendation 10
3.56 The committee recommends that the Australian Bankers' Association
ensures that penalty rates are imposed on customers:
- only in the most exceptional of circumstances; and
- not
in the 12 months after an actual default by the customer of the loan agreement.
3.57 If the default arises from circumstances beyond the control of the farmer
(e.g. natural disaster, market conditions, government regulation or otherwise
as would be described as force
majeure) then penalty interest only be imposed as follows:
- for
the period commencing 12 months after the actual default and ending 24 months
after the actual default—the interest rate at the time of the continuing
default plus 1 per cent; and
- for
the period commencing 24 months after the default and thereafter—the interest
rate at the time of continuing default plus 2 per cent.
Recommendation 11
3.62 The committee recommends that the ANZ takeover of the Landmark loan
book be subject to a review by the soon to be incorporated Australian Financial
Complaints Authority (or equivalent existing regulatory body) and that such a
body have the powers to review:
- all
commercial documents regardless of any confidentiality clauses contained
therein;
- any other matter which may otherwise be subject to
limitation periods; and
- without limitations as to the amount.
Recommendation 12
4.30 The committee recommends that the government establish a nationally
consistent compulsory farm debt mediation scheme, based on the NSW model, with
a $10 million limit on loan amounts that includes the following
provisions:
- that
heads of agreement reached at a farm debt mediation conducted in one state,
which considered matters relating to the farmer's default under a farm mortgage
secured over a farm proper in another state, is recognised by all
jurisdictions;
- that
the process provides that the mortgagee must produce all documents to the
farmer before mediation relating to the loans and banking relationship
including all documents required to be produced by the mortgagee/financier to
either a court of law or the Australian Financial Complaints Authority should
either of those institutions be required to consider farm debt matters; and
- that
refusal by the mortgagee to attend mediation results in the mortgagee being
prevented from enforcing its rights under the mortgage for a minimum 6 month
period.
Recommendation 13
4.49 The committee recommends that the Australian Financial Complaints
Authority be able to:
- consider
disputes relating to loans of up to $10 million and award compensation up to $5
million, with these figures to be reviewed every 5 years;
- review
a customer's complaint within a three year period after the completion of farm
debt mediation if the customer provides reasonable grounds for review;
- issue new orders or make any other determination as
it sees fit;
- subject
to the provisions of the bill establishing the authority, hear and collate
evidence both for its own use and the use in any court of law with jurisdiction
to hear the complaint; and
- hear
complaints about receiver's fees and charges where they are not justified on
the degree of difficulty and complexity of the estate.
Recommendation 14
4.66 The committee recommends that the government commit funding to train
rural counsellors in mediation (or existing mediators in rural practice) to
ensure that all farmers have access to appropriately qualified and experienced
representatives during farm debt mediation.
Recommendation 15
5.66 The committee recommends that:
- the
government introduce higher standards of accountability and transparency for
insolvency practitioners regarding the costs they incur while conducting
receiverships;
- insolvency
practitioners be required to disclose their estimate of costs of the
receivership prior to being engaged;
- insolvency
practitioners be required to account for all incurred fees and outlays and report
these to both the lender and the borrower; and
- insolvency
practitioners be required to provide monthly reports to the lender and the
borrower on their farming management and fees incurred (including future
plans).
Recommendation 16
5.70 The committee recommends in the strongest possible terms that the
Australian Bankers' Association revise the Code of Banking Practice to
stipulate that if an amicable agreement between bank and farmer cannot be
reached through farm debt mediation and the bank needs to sell the family farm,
then:
- receivers not be appointed; and
- instead
the family (if willing) is to remain managing the property and be paid a wage
to maintain it until it is sold.
5.71 However, in extenuating circumstances the banks can use their legal
rights to enforce vacant possession of the land for sale.
Recommendation 17
5.76 The committee recommends that the Australian Restructuring Insolvency
and Turnaround Association ensure receivers appointed to agribusiness cases
must be appropriately qualified in agribusiness and have a strong background
and demonstrated experience in rural management.
Recommendation 18
5.87 The committee recommends that the Australian Bankers' Association and
the Australian Restructuring Insolvency and Turnaround Association implement
policies to ensure that copies of bank or receiver-ordered valuations are
provided promptly to farmers.
Recommendation 19
5.88 The committee recommends that the Australian Bankers' Association and
the Australian Restructuring Insolvency and Turnaround Association ensure that
banks and insolvency practitioners must only engage independent valuers to
value agribusinesses with appropriate qualifications and demonstrated expertise
and experience in the field.
Recommendation 20
5.109 The committee recommends that the Australian Bankers' Association
revise its Code of Banking Practice and the Australian Restructuring Insolvency
and Turnaround Association revise its Code of Professional Practice to
stipulate that every effort be made by banks and receivers (in circumstances
where they are appointed) to achieve the maximum sale price of an asset.
Recommendation 21
5.112 The committee recommends that the government establish a private right
of action for breaches of section 420A of the Corporations Act 2001.
Recommendation 22
6.13 The committee recommends that the Australian Bankers' Association
ensure that banks offer better training and more comprehensive supervision of
bank frontline and management staff to ensure that they deal fairly and reasonably with farming customers and have a sound
understanding of the unique characteristics of primary production enterprises.
Recommendation 23
6.21 The committee recommends that the Australian Bankers' Association adopt
all relevant recommendations of this report when redrafting the Code of Banking
Practice.
Recommendation 24
6.22 The committee recommends that the new Code of Banking Practice
currently being drafted by the Australian Bankers' Association specifically
recognise the operating environment of primary producers.
Recommendation 25
6.23 The committee recommends that the Australian Bankers' Association
stipulate that banks must draw customers' attention to the Code of Banking
Practice when establishing new loans.
Recommendation 26
6.31 The committee recommends that the government establish tailored
initiatives that provide primary producers with guidance on financial literacy
and business management, and resilience training.
Recommendation 27
6.37 The committee recommends that the newly established Royal Commission
into Misconduct in the Banking, Superannuation and Financial Services Industry
fully consider the evidence published by this committee in the context of its
inquiry.
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