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.
"Someone said they did wrong. It wasn't that we were stupid people who got greedy. This justifies that we were ripped off. For me that battle is won," Potroz said of the commission's decision.
"If it goes to court that is the next battle. As for what I would like to see happen, that is hard to say.
"We have lost everything, our way of life, who we are. There is no good outcome. It's too late for us but maybe not others."
The pair are believed to be just one of about 200 Taranaki farmers who used the product.
In March a former banker speaking on condition of anonymity told the Taranaki Daily News many farmers had agreed to gagging clauses in deals offered by banks to exit the loans.
Others are understood to have sold up when threatened with foreclosure.
The investigation into the loans was started by the Commerce Commission last November.
The commission believed there was sufficient evidence the banks have breached sections 9, 11 and/or 13 of the Fair Trading Act.
These sections relate to misleading customers.
"We have advised the banks of our view that swaps were misrepresented to rural customers,'' said commission chairman Dr Mark Berry.
The commission began its investigations into the sales last year after articles by Fairfax Media.
Those article highlighted how some farmers saw their borrowing costs rise in the aftermath of the Global Financial Crisis in late 2007, despite official interest rates falling dramatically.
Farmers, some of who lost their land after being unable to meet repayments, told Fairfax Media the swaps had not been properly explained to them in claims that paralleled those made in the UK where banks sold similar interest rate swaps to small businesses.
In the UK, the banks agreed to look at their sales on a case-by-case basis and offer compensation where they had mis-sold the swaps.
Interest rate swaps are derivative contracts which allow borrowers to manage the interest rate risk of their loans, but they are so complex they are typically provided to large corporate and institutional customers who have skilled treasury personnel and risk advisers to help them monitor their exposure.
But the commission said that from 2005 they were offered by banks and other institutions to rural customers throughout New Zealand.
"This has been a very extensive and complex investigation, but that phase of it is almost at an end," Commerce Commission chairman Dr Mark Berry said.
"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.
"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.
ANZ Bank New Zealand said today that it would continue to work with the Commerce Commission on the issue.
"The issue relates to some rural interest rate swaps mostly sold by The National Bank to large farming enterprises prior to the Global Financial Crisis when international events led to interest rates suddenly dropping by unprecedented levels," it said.
"Immediately following the Global Financial Crisis we worked with our customers, including many farmers, who found themselves in challenging financial circumstances. ANZ, as always, remains committed to working with its customers."
The woman who sparked the Fairfax Media articles was Janette Walker, a farm debt negotiator, who is to stand for Labour at the next general election.
Walker contacted the paper last year after the newspaper began seeking submissions on the Code of Banking Conduct, a voluntary code governing bank conduct, after the Bankers Association refused to release them.
She had prepared the submission for Federated Farmers, and it contained the first reference to be reported in the New Zealand media to the sale of swaps to farmers.
Walker said she had been hearing first hand the tales of the hardship caused to farmers, both in rising interest costs, but also as a result of some farmers paying huge "break fees" to get out of the swaps, in some cases running into hundreds of thousands of dollars.
"They were all saying the same things," she said, including that they had not been given proper disclosure of how the swaps worked.
The impact of the sharply rising interest rates under the swaps, was doubly bad for some Northland farmers who had to contend with a horrendous drought in 2007 and 2008 which cut their incomes at the same time they were facing rising borrowing costs.
"Some of them actually killed themselves," Walker said. "Some of the suicides were finance related, and swaps were sometimes involved."
Others lost their land, she said.
Walker was supported in her efforts to expose the swap sales by Labour MP Damien O'Connor, who after speaking to farmers was left believing swaps had been missold.
"Swaps were hard sold. They really were," O'Connor said.
Walker says she now expects the banks to settle, and for New Zealand to follow the example of the UK, with a non-process under which individual's claims for compensation are considered.
There would need to be independent oversight of that process however, she said.
It is not only farmers who were sold swaps they struggled to understand.
Some local councils have been caught out by interest rate swaps, including one which is now in financial disarray.
Earlier this month the Auditor General released a report into the state of affairs of Kaipara District Council. Among the findings was that it was sold an interest rate swap by the New Zealand subsidiary of Dutch bank ABN Amro, which the council did not understand and was not suited to its needs, and cost the council over $800,000 to pay to get out of.
- Fairfax Media