If your bank has contacted you due to missed repayments on an agribusiness loan, credit cards or overdraft, then it’s essential that you stay in contact.
Your bank has experienced agribusiness specialists ready to help.
The sooner you get in touch, the sooner you can find help.
If you haven’t done so already, you should also speak with a Rural Financial Counsellor (1300 771 741) who can provide you with free, confidential planning and support to help make better informed financial decisions for you and your business.
There may still be options to help
Your bank will work on a case-by-case basis if your finances have been impacted by natural disasters or other recent events beyond your control.
Depending on your circumstances and your bank, there may still be options your bank could offer to help your business through a difficult time.
Your bank may ask you for relevant information depending on the circumstances, so they can better understand how they may be able to help with the potential options available.
If your bank doesn’t allow you to change the terms of your loan, they need to tell you why in writing.
What happens if I can’t make my repayments?
You may receive a default notice
Depending on the arrangement you have in place, your bank may send you a default notice if you’re behind on your payments. A default notice is a letter from your bank to warn you that your loan account is in default due to missed payments. It is important to open all letters from your bank so you know what is happening and what you can do.
You should read your default notice carefully, as it will set out what the bank wants you to do, how long you have to do it, and other information about your position.
If you’re in default your bank may invite you to take part in Farm Debt Mediation (FDM). FDM is available if you are not able to meet your loan obligations. Generally, banks need to offer mediation before they start any proceedings for debt recovery against farmers. FDM is a structured negotiation process between a farmer and their lender. The mediator works with both parties to reach an agreement on current financial arrangements, and the best way forward.
FDM legislation is in place in New South Wales, Victoria, South Australia and Queensland and a voluntary scheme is in place in Western Australia.
Otherwise, if you’re issued with a default notice, usually you’ll still have 30 days to come to an arrangement with your bank about your repayments. For equipment finance you will usually have 14 days. You can still ask the bank for help at this stage. However, if you don’t contact your bank or come to an arrangement with your bank, they may start enforcement or court action.
Where you have been provided with a loan for the purposes of a farming operation, your bank will not charge default interest (or any fee in lieu of default interest) on that loan during any period that the land you use for that operation is in drought or subject to natural disaster. You should tell your bank if this is the case.
You may receive a Statement of Claim
Your bank may take action to enforce the debt and lodge a legal document called a Statement of Claim if you don’t respond to the FDM notice, decline FDM or do not reach an agreement with your bank in FDM or equivalent notice in states without farm debt mediation schemes. This may also happen if you have been unable to meet the conditions of the default notice or reach another arrangement with your bank. A Statement of Claim is a court document that sets out how much your bank claims you owe them and why they are making the claim.
You should seek legal advice if you receive a Statement of Claim as soon as possible and definitely within four weeks of receiving it. If you do nothing, the bank might move to enforce your loan.
You can still talk to your bank and try to come to an arrangement about the loan even after receiving a Statement of Claim.
The bank may appoint an external adviser under your loan terms
It’s in your best interests to appoint your own trusted advisers, and then develop a plan to discuss with your bank.
However, in rare cases a bank may appoint its own external adviser.
Your bank will only appoint a receiver or any other form of external administrator as a last resort.
Should this happen, the bank will act fairly and sensitively to manage potential conflicts of interest.
What you can do if the bank enforces your loan
If you can’t resolve the financial difficulties faced by your business, then your bank should allow you reasonable time and work with you to sell assets and achieve an orderly winding up of your business.
Sometimes it may be in your best financial interests to sell your assets, especially if you can’t make repayments and are losing any equity you had in the farming operations.
It’s important to understand that delaying decisions about selling assets or winding up your business may increase your costs. Your assets may have reduced in value compared with selling earlier, which may result in a larger financial loss for you.
The best thing you can do is talk to your bank. They will try to help consider possible solutions that are right for you.
Loans subject to guarantee
If your loan is subject to a guarantee, your bank will notify your guarantor about your deteriorating financial position, and within 14 days provide:
- A copy of any formal demand or default notice that the bank gives the borrower
- A written notice if you have advised your bank that the borrower is experiencing financial difficulty which has resulted in a change to their loan
- A written notice if the borrower is in continuing default for more than two months after the issuance of the default notice referred to above.
If you default you may be required to sell the property to pay back the loan. If you are unable to cover the loan, and the sale price does not pay back the full farm mortgage amount, the bank may be able to enforce the guarantee and recover the difference from the guarantor.
It’s a good idea that you and your guarantor seek separate legal advice upon receipt of any notice or formal demand for payment to a guarantor. Guarantors can also contact the bank if they are experiencing financial difficulty.
What if I need a lawyer?
If you have limited funds to pay for a lawyer, the Law Society in your state can give you the names of lawyers who might be able to help with your case. The lawyer will need to explain how much their services are likely to cost or they may take your case ‘pro bono’, where they are able to waive their fees.
How has this affected my credit rating?
If you’re in default your credit rating may be affected. A poor credit rating can affect your ability to receive finance in the future. Your bank will tell you if they make a report about a default to a credit reporting body.
Avoid companies offering to repair your credit rating. The Moneysmart website explains what you can fix and how to do it for free.
What if I’m still not happy with the response?
If you’re not happy with your bank’s response, you can make a complaint. You can find more information here.
In many cases, the complaint will be resolved internally between you and your bank with no further action required.
However, if your bank still doesn’t resolve the complaint to your satisfaction, you can take your complaint to the Australian Financial Complaints Authority (AFCA).
AFCA is an independent complaints scheme that is free for consumers and small business customers. It provides an accessible way of resolving disputes, without having to go to court. The decision of the AFCA is binding on the bank. AFCA can only consider a complaint about a small business or agribusiness credit facility under $5 million.
You should only go to the AFCA after you have tried to resolve things with your bank, as AFCA will not deal with your complaint unless you have first given the bank the chance to help you.
