Thursday, March 26, 2009

A better way to regulate housing agent

26 March 2009

Forum Page
Straits Times

A better way to regulate housing agent

Senior Minister of State Lim Hwee Hua reported in Parliament that the Government is reviewing ways to strengthen the regulatory framework for housing agents. This is in response to complaints about malpractices by housing agents.

The measures being considered are:
1. raise professional standard of agents
2. quality and training requirements
3. dispute resolution framework
4. enforcement framework

This 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 the mis-selling of credit linked notes and other financial products that are bad for consumers.

This approach relies on the principle of the free market - provide information for consumers to make their decision. The crux of the problem - 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 has to look after the interest of the consumers, and to take appropriate action against "cheating". Cheating is a crime - and include making an unfair profit by misleading the other party.

In my view, a better alternative is to have a strong regulator to set the rules for the market. An example is the 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 take the responsibility to put the stamp on the product.

I prefer a system where the regulator licenses the agents and sets the professional standards of ethics and conduct. If the agents fail to meet the standard, they should be removed. This is similar to 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 the "teeth" and backing of the regulator. I wish to say that stronger regulation actually benefits the majority of ethical agents and create a better market for all parties.

I hope that the Government will consider the above suggestions.

Tan Kin Lian

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