Mediation in Debtor/Creditor Relationships

Two states that have substantial interests in agricultural debtor/creditor relationships have attempted to limit the social and economic costs of prematurely terminating the debtor/creditor relationship. Iowa and Minnesota have adopted a statutory requirement that the creditor offer to submit to mediation prior to taking any debt collection action against an agricultural borrower. This Note argues that requiring creditors to offer mediation as a statutory prerequisite to debt collection is an effective means of reducing the social and economic costs of the premature termination of a debtor/creditor relationship in business contexts. Part I examines the conceptual foundations of the mediation process and analyzes the viability of extending mediation to debtor/creditor relationships, concluding that mediation can provide effective assistance in negotiating an alternative solution to repossession of collateral. Part II examines the mediation statutes of two agricultural states. An evaluation of empirical data from the Iowa Farmer/Creditor Mediation Service demonstrates that mediation has proved successful in resolving agricultural debtor/creditor disputes. Part III explores the feasibility of requiring mediation in debtor/creditor relationships outside of agriculture, including business and consumer loan contexts. Although mediation is probably more . appropriate and cost-effective in the case of business loans, possibilities also exist for application to consumer loans above a threshold amount.