Information for producers applying to the Farm Debt Mediation Service (FDMS) with an outstanding advance under the Advance Payment Program (APP)

Important information

APP Default for FDMS 5(1)(a) Applications

Should your request for mediation and a stay of proceedings under Section 5(1)(a) of the Farm Debt Mediation Act (FDMA) be approved, all outstanding balances on APP advances granted to you will automatically be declared in default, in accordance with the terms and conditions of the Repayment Agreement(s) which you signed with the APP administrator(s) when you applied for your advance(s).

APP Default for FDMS 5(1)(b) Applications

Or should your request for mediation under Section 5(1)(b) of the FDMA be approved, all outstanding balances on APP advances granted to you will not automatically be declared in default, but no additional advance can be granted to you until the mediation is over. If the settlement agreement proposed through FDMS does not offer a full repayment of the APP advance, all outstanding APP balances granted to you will automatically be declared in default, in accordance with the terms and conditions of the Repayment Agreement(s) which you signed with the APP administrator(s) when you applied for your advance(s).

What does not constitute a full repayment of the APP Advance?

A settlement agreement which does not meet the terms and conditions of the Repayment Agreement(s) you signed and which includes:

  1. a partial reimbursement of the APP advance;
  2. a reimbursement that will run beyond the end date of the production period for which you received your advance; or
  3. a settlement which jeopardizes the security on the APP advance.

AAFC Guarantees APP Advances

Listing your APP administrator with Agriculture and Agri-Food Canada (AAFC) as creditors on the FDMS application form will accelerate mediation process.

What can the APP administrators and AAFC offer me?

APP administrators can only approve settlement agreements offering a full reimbursement of the APP advance. Any settlement agreement which does not offer a full repayment of the APP advance must be referred to Agriculture and Agri-Food Canada (AAFC) Collection Unit for approval. However, due to the confidential nature of the Farm Debt Mediation Service, neither the APP nor FDMS administrators can transfer to AAFC the information obtained under the mediation process.

The APP Repayment Agreement stipulates that in case of default, an interest penalty is payable.

However, because you have applied for mediation, AAFC is prepared to show some flexibility by deferring the default interest penalty, if your APP advance is not already in default at the time of your application for mediation and you are in a position to negotiate and sign a settlement agreement through the FDMS by the end of the production period. Note that APP administrators do not have the authority to offer you the default interest penalty deferral.

When you apply for FDMS

It is suggested that, you indicate the name of your APP administrator with AAFC (e.g., Canola Growers Associations – Agriculture and Agri-Food Canada) on your FDMS application form to ensure that a) your FDMS mediation occurs in a timely manner, b) AAFC Collection Unit be in a position to analyse any proposal made as part of the mediation process, and c) AAFC Collection Unit can offer you the interest penalty deferral normally associated to default under the APP.

Listing your APP administrator with AAFC as creditors on the FDMS application form will accelerate mediation process.

If you do not indicate AAFC with your APP administrator on the FDMS application form, at a later time, you will be requested to provide your consent to allow the FDMS to replace your APP administrator(s) with AAFC as the effective creditor.

If you indicate AAFC with the name of your APP administrator on the FDMS application form or once you will have signed the consent form, the FDMS will send the mediation notice and any other documentation prepared as part of the mediation process to your effective creditor (i.e., AAFC) once you are considered in default under the APP.

The Implications for your mediation

Your recognition that AAFC guarantees your APP advance or your consent will allow:

  • AAFC’s Collection Unit, as your effective creditor, to receive the notice and any other documents from FDMS, and to participate in the FDMS process once you are considered in default by APP or negotiate directly with you if no agreement is reached through the FDMS mediation.
  • AAFC’s Collection Unit to defer the interest penalty payable in the event of default, if you successfully negotiate and sign a settlement agreement before the end of the production period, either through the intermediary of the FDMS or through direct negotiations with AAFC. Note that the APP program administrator(s) do not have the authority to defer the default penalty.
    The default interest penalty can only be deferred if you were not already in default under your APP Repayment Agreement at the time of your application under the FDMA.
  • You to negotiate a settlement agreement directly with AAFC’s Collection Unit as soon as the stay of proceedings is lifted by the FDMS, should you decide to withdraw from the FDMS process or if no agreement is reached through the FDMS process. Any settlement agreement must be negotiated and signed before the end date of the production period. If no agreement is reached before this date, you will automatically be deemed in “regular” default. All penalties usually applicable in a regular default will apply and your default will be processed like any other default.
  • You, should the FDMS process still be in effect at the end date of the production period, to benefit from the interest penalty deferral if a settlement agreement is reached through the FDMS mediation. If no agreement is reached through the FDMS mediation and you will not repay your APP advance, you will automatically be deemed in “regular” default. All penalties usually applicable in a regular default will apply and your default will be processed like any other default.

If you successfully negotiate and sign a settlement agreement, you will only be liable for the capital amount of the advance and interest payable on the interest-bearing portion of the advance (above $100,000) at the rate established under the original repayment agreement you signed with the APP administrator(s). However, if no settlement agreement is successfully negotiated, either through the FDMS or with AAFC’s Collection Unit directly, you will not benefit from the deferral of the interest penalty. All penalties usually applicable in the case of a default will apply and your default will be processed like any other default.

You will not be penalized through APP if you apply to FDMS. Default penalties for your APP advance are retroactive to the date of receipt of the APP advance. Applying to FDMS for mediation with a stay of proceedings (under Section 5.1(a) of the FDMA) will trigger you to be placed in default because you cannot pay your APP advance under the terms of your APP advance repayment agreement. The interest penalty will have the same start date (APP advance receipt) regardless of your application to FDMS.  

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