Information for creditors

Creditors’ rights and obligations

Under the Farm Debt Mediation Act 2011 (the Act), creditors are required to offer mediation to farmers before starting debt recovery proceedings on farm mortgages.

A farmer can also request mediation with their creditor whether or not they are in default under a farm mortgage. The creditor can accept or refuse an offer to mediate.

If the creditor refuses to mediate and the farmer is in default, the farmer can request a prohibition certificate from the Victorian Small Business Commission (VSBC). This certificate stops a creditor from starting enforcement action for up to six months or until the day the farmer and creditor enter into mediation.

Exemption certificates

An exemption certificate enables a creditor to start enforcement action. A creditor can request an exemption certificate from the VSBC if the farmer is in default, no prohibition certificate is in force in relation to the farm mortgage and

  • satisfactory mediation has taken place (which means that mediation has resolved the matter or that mediation has proceeded as far as it reasonably could though hasn’t resolved the matter) or
  • the farmer has refused to mediate or
  • three months have passed since the creditor issued a notice to the farmer under section 8 of the Act and throughout that period, the creditor has attempted to mediate in good faith.

A creditor is required to obtain an exemption certificate in all instances before taking enforcement action under a farm mortgage, including when the farmer has not responded to their offer of mediation.

The VSBC has some discretion in the issuing of exemption certificates. For example, we may refuse to issue this certificate where we are satisfied that the farmer is justified in refusing or failing to mediate and the farmer intends to mediate within a reasonable timeframe.

If a farmer asks their creditor to mediate when they are not in default and mediation takes place, an exemption certificate cannot be issued.

If a creditor has been issued with an exemption certificate but does not start enforcement action before the certificate expires, they must provide the farmer with notice of the availability of mediation again and obtain a new exemption certificate before they can take enforcement action.

In situations where mediation Terms of Settlement are in force, the creditor should not proceed with enforcement action where the said Terms of Settlement are being met.

The farmer will be advised of a creditor request for an exemption certificate and of the issue of this certificate. An exemption certificate remains in place for three years.

Prohibition certificates

A creditor must not start enforcement action against a farmer if a prohibition certificate has been issued. Learn more

Record keeping

Both the creditor and farmer should keep accurate records and evidence of the service of notices, as well as copies of all notices served.

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