Renewed push to end ‘cruel’ bank rates on farms
Calls are mounting for the remainder of Australia’s four big banks to follow in National Australia Bank’s footsteps and end penalty interest rates and allow offsets for farm management deposits.
NAB announced last week it would no longer charge penalty interest payments for farmers who fell behind in loan repayments, in response to damaging publicity from the financial services royal commission.
NAB chief executive Andrew Thorburn said he was ashamed by some of what he heard from the royal commission.
“I’m proud of what we do, and banks do, but sometimes we get it terribly wrong,” he told ABC radio.
NAB would also permit farmers to effectively offset their Farm Management Deposit balances against their loans.
National Farmers’ Federation chief executive Tony Mahar said the NFF welcomed both the end of penalty interest rates and the provision of an FMD offset facility.
“The practice of imposing what can only be described as punitive interest on farmers who miss repayments is not only cruel but pointless,” he said.
“If a farmer doesn’t have the funds available to meet the repayment obligations in the first place, they won’t have the cash to pay additional interest.”
FMD accounts must be held in a person’s name, but many farm loans are to companies.
This has made an offset facility for an FMD more complicated than for a home mortgage where both the loans and deposits are in the same names.
Mr Mahar said he acknowledged the complexities NAB faced in offering the offsets and he welcomed the “work around” the bank had put in place.
Instead of a reduction in interest due on the principal amount owed by the amount in the offset account, NAB would provide an interest rate discount to farmers, averaging half a per cent.
Federal Minister for Agriculture David Littleproud called on all banks to stop charging penalty interest rates and offer an FMD offset facility.
None of the other big four banks has yet said it will offer an offset facility for Farm Management Deposits.
An ANZ spokesman said it did not increase interest rates for distressed customers and would provide interest rate relief in cases of extreme distress in drought-declared areas.
Westpac spokeswoman Lucy Wilson said the bank did not charge penalty rates in drought-declared areas.
The Commonwealth Bank previously said it would no longer charge drought-stricken farmers penalty interest.
Mr Littleproud said he was disappointed that the Commonwealth did not offer an FMD offset facility.
Today the Commonwealth Bank donated $2 million to Eastern States drought relief.
Mr Littleproud said the donation was roughly one five-thousandth of the bank’s near $10 billion annual profit.
He said Rabobank had ruled out an FMD offset product.
“You have to ask how serious that bank is about agriculture in Australia,” Mr Littleproud said.
A Rabobank spokeswoman said the bank did not charge penalty rates where loans were impacted by drought and natural disasters.
Farmanco farm management consultant Rob Sands said he would comment when more details thought the banks could be more innovative.
He said he would be able to make recommendations to his clients regarding the NAB FMD offset product when all the details became available.
Mr Sands said he encouraged all farmers with banks that had not yet offered the offset facility to ask why to maintain pressure for change.
“The onus now clearly rests with all other rural lenders to follow suit,” he said.
“FMD offsets have the potential to ease the financial burden of drought, which is bearing down on many farming families right now."
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