Farmers willing to join suit
Farmers signed up to complex credit swaps promoted by their banks are willing to join a class action suit in a bid to recoup money spent breaking the contracts.
The Commerce Commission yesterday announced plans to issue legal proceedings for breaches of the Fair Trading Act over the sale of interest rate swap contracts to farmers.
ANZ, ASB and Westpac may have misrepresented the interest rate swaps to rural customers, the competition watchdog said.
The swap contracts were meant to allow the farmers to manage the interest rate risk of their loans. But when interest rates plummeted, the farmers found they were locked into contracts with high interest rates.
An influential Canterbury farmer, who did not want to be named, said a credit interest swap contract he signed had cost him more than $600,000 to break.
"It was bloody hard, and it cost a lot of money."
The farmer, who owns several properties, said he did not understand the swaps when he signed up. He signed because his bank said interest rates were going to go up and he should lock in a good rate, he said.
He said the contract, and the break fee, had a big impact on his business.
"I am happy to join in any class action, very happy to. Because they cost me a lot of money."
Another Canterbury farmer said he had paid out "six figures" to get free from a credit interest swap contract promoted by his bank.
"I think [the bank] exploited a situation that they didn't need to. These guys were pushing people into a corner."
He said the bank had sold him the credit interest swap by saying it would mean he would get "an interest rate you could work with".
"What we didn't know was that the interest debt would be added to our balance sheet." As a result his credit rating was reduced.'
He said it had been stressful and he had taken on more debt in order to get free of the credit rate swap.
"Not everybody could afford to buy them out . . . I have heard of situations where people sold property to get out."
He said he would be watching the commission's action "very closely" in a bid to "reclaim some very expensive money".
- Fairfax Media