The Commerce Commission is seeking more information from farmers and others who entered into a financial derivative product known as interest rate swaps.
The Commission has received complaints primarily from the rural community alleging they were mis-sold the product by certain banks. In particular complainants allege that the nature and characteristics of the swaps were promoted in a way that was misleading.
The Commission has been assessing this information and has requested and received preliminary information from the banks and more detailed information is being sought.
“This is a very complex investigation and we are at an early stage. We have not yet formed a view as to whether the Fair Trading Act has been breached, however we do have sufficient concerns that we wish to probe further,” said Commerce Commission Chairman, Dr Mark Berry.
Many farmers claim to have suffered significant financial loss as a result of entering into the interest rate swaps.
“We have information from around 60 complainants at this stage, but will need more people to come forward if we are to form a complete picture of the issue,” said Dr Berry. “We are not only interested in people who feel that they have been misled but also those who are satisfied with the way the product was sold to them.”
The Commission is inviting affected farmers and others who may have been involved with swaps to read information on the Commission’s website and complete a questionnaire at www.comcom.govt.nz/interest-rate-swaps
Interest rate swaps are a financial derivative product that allows a client to manage their interest rate exposure on their borrowing. They were principally provided to large corporate and institutional customers, but were later were offered to rural and commercial clients throughout New Zealand by various banks.
The Fair Trading Act
Businesses found guilty of breaching the Fair Trading Act may be fined up to $200,000 for each charge. Where more than one charge is laid, the court may impose a fine greater than $200,000. Only the courts can decide if a representation has breached the Fair Trading Act.
It’s not the first time banks have been accused of defrauding farmers in New Zealand. Back in the 1980s a series of fake foreign exchange deals forced thousands of farmers into mortgagee sales in the banks’ favour. Their story is detailed in the book Daylight Robbery.