### stuff.co.nz Last updated 17:17 17/12/2013
Banks taken to court over farm deals
By Rob Stock and Matt Rilkoff
In a war that has cost her a lifetime of work, former north Taranaki farmer Angela Potroz says she has finally won a battle.
The Commerce Commission announced today it intended to take ANZ, ASB and Westpac banks to court for “misrepresenting” sales of interest rate swap loans to rural customers.
Potroz and her husband John were some of the hundreds of farmers persuaded by The National Bank (now branded ANZ) to take the financial product in 2007 as a way to “beat” rising interest rates.
Nearly inexplicable to all but financial experts, the products were often sold to farmers as being fixed rate loans “with benefits”.
But when the global economy fell apart, interest rates on the swaps soared and fine print penalty clauses kicked in.
With the bank refusing to offer the Potrozes any relief and refinancing costs in the millions, the couple said they were doomed to fail.
In November 2012 they sold four sheep and beef farms valued at $18.85 million in 2010 for just $12.08m after the bank demanded their $11m swap be repaid in full.
Media Release: Commerce Commission proposes to issue proceedings on interest rate swaps
17 December 2013
The Commerce Commission confirms that it has advised three major New Zealand banks, ANZ, ASB and Westpac, that it intends to issue legal proceedings over their sales of interest rate swap contracts to rural customers.
The Commission has advised the banks that in its view there is sufficient evidence that they may have breached sections 9, 11 and/ or 13 of the Fair Trading Act, and that it wishes to place the matter before the Court for its decision.
Commerce Commission Chairman Dr Mark Berry says the Commission aims to file proceedings in March 2014.
“This has been a very extensive and complex investigation, but that phase of it is almost at an end. We have advised the banks of our views that swaps were misrepresented to rural customers. I expect to have more talks with the banks about these views, and about the different facts that might apply to each of them, over the coming months,” said Dr Berry.
“Because court proceedings are in prospect, the Commission will not be commenting further at this time.”
The Commission is also considering the conduct of other institutions that have sold interest rate swaps.
The Commission encourages affected swap customers to contact the Commission on 0800 943 600.
Interest rate swaps are a financial derivative product that allows a borrower to manage the interest rate exposure on their borrowing.
Interest rate swaps were typically provided to large corporate and institutional customers, but from 2005 were offered by various banks to rural customers throughout New Zealand.
In August 2012 the Commission began enquiring into whether interest rate swaps were misleadingly marketed from 2005.
This matter relates to ANZ Bank New Zealand Limited (ANZ), ASB Bank Limited (ASB), and Westpac Banking Corporation and Westpac New Zealand Limited (together, Westpac).
Interest Rate Swaps
17 December 2013: Proposed Legal Proceedings – Questions and Answers*
*Click on Question links for Answers
1. Which banks does the Commission intend to take court action against over the marketing and sale of interest rate swaps to rural customers (farmers)?
2. Background to investigation and decision to take court action
3. What does the Commission intend to do?
4. When is the Commission filing proceedings against the banks?
5. How much have farmers lost as a result of the alleged conduct?
6. My farming business purchased interest rate swaps. Do I need to do anything?
7. My farming business bought an interest rate swap or swaps from one of the named banks. Am I going to get compensation?
8. How long will it take for an outcome on the case?
9. My farming business purchased a swap from one of the banks identified by the Commission. I am in financial difficulty with the bank. How will these proceedings affect me and what should I do?
10. I have settled a complaint with one of the banks named over the sale of interest rate swaps? Can I still assist the Commission?
11. I am worried that if I help the Commission in its proceedings there may be repercussions against me or my business by the bank I deal with?
12. What about swaps sold by other banks?
13. My business purchased swaps but it is not involved in farming. Do you want to hear from me?
█ Interest Rate Swaps Investigation – Proposed Legal Proceedings Questions and Answers 17 December 2013 (PDF, 50 KB) Published on 17 December 2013
█ Notes for meeting with Damien O’Connor MP on Interest Rate Swaps Investigation 9 May 2013 (PDF, 41 KB) Published on 10 May 2013
█ Interest Rate Swaps Investigation Questions and Answers March 2013 (PDF, 88 KB) Published on 27 March 2013
█ Interest Rate Swaps Investigation Questionnaire March 2013 (PDF, 47 KB) Published on 10 May 2013
Posted by Elizabeth Kerr