The following summaries provide further analysis of the key themes or conduct that was raised in public submissions received by the Commission.
Figure 11: Agricultural lending submissions: Key themes
Valuations and enforcement of defaults
Over 85 submissions raised concerns about practices involving the valuation of properties, including primary residences and security properties associated with loans, and enforcement action taken following default of loans. Key themes raised in submissions referring to valuations included:
- banks inflating the value of security properties to facilitate the approval of loans, sometimes where properties were subsequently revalued at substantially lower values following loan approval;
- borrowers being encouraged to take out additional loans or overdrafts to fund expansion, equipment or stock only to be defaulted shortly after doing so;
- banks revaluing security properties at substantially lower values, resulting in a breach of loan-to-value ratio (LVR) terms of a loan;
- in-house valuations performed by bank staff who did not have sufficient expertise about the agricultural industry;
- failure to discuss alternative options with borrowers who were unable to service agricultural loans leading up to default, and refusal to negotiate once the bank had ordered that assets be sold; and
- sale of assets or properties at values below what the farmer considered to be the market value of the property, often supported by independent valuations obtained by the farmer.
Changes to conditions of lending
Over 65 submissions received in relation to agricultural finance claimed lenders unilaterally made changes to the terms on which a loan was offered. Key concerns raised included:
- changes to the expiry period for loans, the amount of the loan and the types of facilities offered (such as overdrafts, trading facilities and lines of credit) which were seen as unfair, or meant the borrower was unable to meet the repayments required;
- significant changes to guarantees of finance for new or existing agricultural businesses, or refusing to renew or allow such guarantees to the detriment of the borrower; and
- withdrawal of verbal offers of finance after the borrower had entered into funding agreements with suppliers or buyers.
At least 60 submissions claimed that actions by a financial services entity were misleading, fraudulent or otherwise inappropriate. Key themes raised in submissions referring to improper conduct included:
- allegations that financial services entities falsified documents, including loan application information, valuations, and documents relating to the disposal or sale of properties following default;
- allegations of intimidating or threatening behaviour once a loan had been placed in default; and
- financial services entities requiring borrowers to sign documentation while they were seriously ill or receiving medical treatment which impaired the borrower’s ability to understand any risks involved.
Difficulty in obtaining access to banking services and appropriate support
Over 55 submissions referred to issues with obtaining appropriate access to banking services, failure to respond to requests for hardship assistance, or inadequate support from lenders following default. These issues included:
- failure to respond to contact from borrowers in a timely manner, including requests for assistance, provision of documents, or delays in settling finance;
- claims that financial services entities lacked understanding of the seasonal nature of farming operations, and the impact of drought on cashflows;
- enforcement of default where borrowers considered they would be able to trade out of debt had the bank supported their operation over the short-term, based on projected income;
- failure by lenders to give any advance notification that a loan was considered to be impaired; and
- banks enforcing unreasonable timeframes for repayment of loans or sale of assets following default, and in some cases requiring repayment of several million dollars in less than 30 days.
Receivers and administrators
Individuals also raised issues about receivers and administrators. As noted in the Interim Report, receivers and administrators are not financial services entities as defined in the Letters Patent and so their conduct does not fall directly within the scope of the Commission’s inquiries. However, issues relating to the appointment of receivers by banks were considered by the Commission in its Round 4 public hearings on the basis that they concerned the conduct of financial services entities and so fell within the Terms of Reference.
While a number of people included comments about the conduct of an administrator or receiver as part of their submission, there were 20 submissions that primarily focused on the appointment and subsequent conduct of receivers and administrators. Many of these submissions raised concerns about the conduct of receivers and administrators both in their dealings with borrowers, as well as their management of properties and stock.
Farm debt mediation
In addition to the themes above, over 45 submissions referred to the farmer’s participation in farm debt mediation. These submissions generally raised concerns about the process, suggesting that the process favoured the financial services entity or did not lead to satisfactory outcomes from the farmer involved, or that the financial services entity had not agreed to participate in voluntary farm debt mediation processes when requested.