Federated Farmers: Feds satisfied with settlement

The Commerce Commission has commenced settlements with three major rural lenders

Federated Farmers welcomed the recent Commerce Commission's settlements with three major rural lenders, ANZ, ASB and Westpac.

The settlements come after a two-year Fair Trading Act investigation by the commission, which saw it consider hundreds of complaints from farmers who had suffered losses arising from alleged mis-selling of interest rate swaps.

Federated Farmers' position throughout the swaps saga has been that individual responsibility should be paramount, but with the caveat that if banks mis-sold swaps or were oppressive in their subsequent conduct, then the Commerce Commission should investigate and hold banks to account -- which it has done.

The three settlements are each different in that they reflect differences in the nature of marketing and conduct by each bank, such as increases in margins and use of early termination fees. While some farmers will feel the payments are insufficient, the commission feels they are a reasonable approximation of the potential losses it could have recovered through any court proceedings.

The settlements are a strong message to all banks of the need to get it right when selling what are complex financial products and that they need to be fair and reasonable when things go sour, as they did following the Global Financial Crisis.

The experience is an equally important reminder to farmers they must be sure they understand the contracts they are entering into and that they get sound and independent advice.

The swaps saga has been a long-running issue and Federated Farmers is pleased it has now reached a conclusion.

Hopefully enduring lessons have been learnt on all sides.

In the end, banks need to be mindful a good relationship between it and its customer is paramount if they are to secure future business.

In total, the settlements provide $24.2 million for rural customers and rural support organisations.

The biggest settlement is with ANZ, which requires the bank to set up a payment fund of $18.5 million available to 178 customers who registered complaints with the commission.

It will also pay $500,000 to the commission for its costs, and some monies from the payment fund will also be distributed to charitable organisations for the assistance of the rural community.

ASB's settlement provides for a payment fund of $2.7 million for 40 eligible customers, and it will also pay $250,000 to the commission for its costs and $250,000 to the Dairy Women's Network.

Westpac's payment fund is $2.47 million for 38 eligible customers, and it will pay $250,000 to the commission for its costs and $250,000 to Rural Support Trusts.