Housing agents: Need for a strong regulator

Source : Straits Times - 25 Mar 2009

IN YESTERDAY’S report, ‘Regulation of property agents under review’, Senior Minister of State for Finance and Transport Lim Hwee Hua told Parliament the Government is reviewing ways to strengthen the regulatory framework for housing agents. This was in response to complaints about malpractices by housing agents.

The measures being considered refer to raising the professional standard of agents, quality and training requirements, the dispute resolution framework, as well as the framework for enforcement.

The approach is similar to the regulatory framework used for the sale of life insurance and investment products. It has failed to deal with the problem of mis-selling credit-linked notes and other financial products that are bad for consumers.?

This approach relies on the principle of the free market, which is to provide information for consumers to make their decision. The crux of the problem is that the information is provided by the seller, who makes a bigger profit or commission by mis-informing the consumer. There is a serious conflict of interest.

If this approach is adopted, the regulator must look after the interest of consumers, and take appropriate action against cheating, which is a crime that includes profiting unfairly by misleading the other party.?

A better alternative is to have a strong regulator to set the rules for the market. An example is regulation on the sale of medicine and food products. These products are tested to be safe and suitable for consumption. The regulator can carry out the test or engage independent experts to do the work. But the regulator takes responsibility to put the stamp on the product.

A better system is one in which the regulator licenses agents and sets professional standards of ethics and conduct. If agents fail to meet the standard, they should be removed, which is the case in the licensing of doctors, lawyers and other professionals.

The regulator has the option to outsource the actual assessment to a professional or self-regulatory body, but this body should have ‘teeth’ and the backing of the regulator. Stronger regulation actually benefits the majority of ethical agents and creates a better market for all parties.

I hope the Government will consider these suggestions.

Tan Kin Lian