Scoop has an Ethical Paywall
Work smarter with a Pro licence Learn More

Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Banks fork out a total $25.5M over rural interest rate swaps

Banks fork out a total $25.5 million over interest rate swaps to farmers

By Fiona Rotherham

Oct. 7 (BusinessDesk) - The Commerce Commission has completed the distribution of $25.5 million to complainants and rural charities after reaching settlements with banks who had marketed interest rate swap products to farmers.

The commission says nearly $20 million in cash has been paid to eligible customers while $1.9 million was offset by the banks against debts some complainants owed to them. A further $2.5 million went to 14 regional Rural Support Trusts and the Dairy Women’s Network and the commission received $1 million to cover a portion of its investigation costs, including legal expenses. The bulk of the money came from the ANZ Bank New Zealand, which paid out $19.3 million in total, $3.2 million from ASB Bank and $3 million from Westpac Banking Corp.

ANZ, ASB, and Westpac were investigated for their marketing, promotion, and sale of interest rate swaps to farmers between 2005 and 2012. While the commission initially threatened legal action in March 2014, it ended up negotiating confidential settlements with all three banks to pay a total $24.2 million in compensation, which eventually rose to $25.5 million as some payments ended up being more than first anticipated.

The final deal with Westpac in February ended investigations by the commission and the Financial Markets Authority. A total of 179 farmers had laid complaints with the commission.

Interest rate swaps are a financial derivative that allows the borrower to manage interest rate exposure on their loan. They worked well for borrowers when interest rates were high but problems began when floating interest rates dropped dramatically from late 2008 and farmers were then locked into high costs they couldn’t escape from without incurring high fees.

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

More than 97 percent of the settlement offers were accepted but a small number who were told the cash would be offset against their recorded debt rather than paid out, either declined the offer or didn’t respond. ANZ put any left over payment money towards what it paid rural charities while ASB is understood to have kept the residual amount which was less than $20,000.

The settlement terms included agreement that acceptance of the offer meant individual claims could not be taken further legally.

Commission chair Mark Berry said he was pleased with the high acceptance rate.

“Being able to deliver the payments now, compared with farmers otherwise facing lengthy and uncertain court proceedings, is a good outcome,” he said.

When the negotiated settlements were announced earlier this year, Labour’s Primary Industries spokesperson Damien O’Connor said the commission had proven as “useless as tits on a bull” because it failed to follow through with its threatened legal action against the banks in favour of settlements that reinforced “the growing view that money buys justice”.

Other critics opined farmers would have likely got more compensation if legal action had gone ahead.

Janette Walker, a former farmer who negotiates with the banks over debt problems, estimated some $8 billion was lent on the interest rate swaps to around 1500 farmers during the period investigated, at rates ranging from 9 percent to 12 percent.

(BusinessDesk)

© Scoop Media

Advertisement - scroll to continue reading
 
 
 
Business Headlines | Sci-Tech Headlines

 
GenPro: General Practices Begin Issuing Clause 14 Notices

GenPro has been copied into a rising number of Clause 14 notices issued since the NZNO lodged its Primary Practice Pay Equity Claim against General Practice employers in December 2023.More

SPADA: Screen Industry Unites For Streaming Platform Regulation & Intellectual Property Protections

In an unprecedented international collaboration, representatives of screen producing organisations from around the world have released a joint statement.More

 
 
 
 
 
 
 
 
 
 
 
 

Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.