Why the Consumer Protection Reform Strategy Fails 16

Monday, July 13th, 2015
liked this article
Allegion – 300 x 250 (expire Feb 28)
Someone writing plan A and plan B on a board
FavoriteLoadingsave article

It is clear that the Domestic Building Consumer Protection Reform Strategy was created as a mirage, to give a vision of providing better protection for consumers.

On close examination, just like a mirage, we see an illusion with no visible means of any real consumer protection. In reality, the ‘strategy’ was never intended to enhance consumer protection; rather, it was intended to delude and deceive both consumers and the public.

For the payers of the pipers, consumers who finance the domestic building industry and directly fund all the government agencies involved in its supposed ‘governance,’ all were denied any say in the ‘strategy.’

Consumers’ voices were forcibly silenced, just as has been the practice for two decades, which was critical to the successful passage of what is really the ‘no consumer reform strategy.’ Crushed, the consumer ‘payers of all the pipers’ were excluded from contributing even a line to the chorus, much less calling the tune!

How did this ‘strategy’ come about?

In order to understand the governance of the domestic building industry, it is important to consider some of the historical background. Deregulated in 1993 and effectively uncontrolled, the industry and its governance descended into lawlessness, this documented in many independent reports and reviews over the past 20 years.

Underpinning the governance scheme was, and is, a weak ‘regulator’ and a meaningless ‘registration regime.’

There is virtually no industry oversight, no enforcement of laws and regulations, no monitoring of conduct and few practitioners are ever penalized. As a consequence of the no punishment for recalcitrant practitioners’ policy, there has been no deterrent to their abuse of the system. In reality, the cowboys have been encouraged to increase in number, with their ever-worsening misconduct sanctioned. Known in the industry as ‘gods’ and ‘untouchable’, those officials purported to be in control of the industry, with a supposed duty of care to protect consumers, in fact abrogated their responsibilities.

Instead, these officials have acted as collaborators, authorising and enabling cowboy misconduct. In truth, consumer protection has been sacrificed with consumers’ rights misappropriated; the building practitioner offenders – and not consumers – have been protected by the public officials. This certainly seems incongruous, but shamefully, this is the consumer reality.

The Building Commission/Victorian Building Authority has acted as a ‘no touch’ regulator, this leading to the inevitable artificially-created ‘building disputes’ – a direct result of a total lack of regulatory enforcement combined with disregard for all building and consumer laws.

In turn, this has spawned an ever-increasing ‘building dispute industry’; one in which owners who seek justice are forced into a biased and unfair legal system, where consumers have virtually no access to justice. Instead, we have a ‘legal system’ functioning as a ‘no justice system’, every year delivering large-scale consumer harm.

Finally, we have the ‘Last Resort’ or ‘no resort’ insurance scheme, another government stratagem compelling owners to pay for insurance premiums that are in fact donations to the VMIA and insurance brokers. Yes, building consumers must pay for insurance that 99 per cent of them can never claim!

Following the extremely damning report by the Victorian Auditor-General on Compliance with Building Permits in 2011 and the even more damning Ombudsman’s Report on the Investigation into the Governance and Administration of the Victorian Building Commission in 2012, the then-Liberal government was forced to make some response.

The conduct of the senior executives of the Commission, the Building Practitioners Board and the Department of Planning and Community Development were severely criticized, with both reports offering scathing rebukes of the bureaucrats’ conduct over two decades. These officials were put under the spotlight, but no action was taken against any individual. A small number of very senior officials were allowed to resign, but the majority remained, and then additional replacements were recruited at the senior levels, these predominantly from a similar background and culture.

Thus, the ‘no regulation’, ‘conflict of interest’ and ‘capacity for corruption’ culture continues unabated, and for the government officials in all the responsible departments and agencies, it is business as usual.

By 2012, the government was forced to make some policy-type response to a domestic building industry under siege. Not only was the industry in crisis, but decades of appalling governance had been exposed.

The public officials responsible for the calamity were called upon to create a ‘solution’ that could be sold to consumers as ‘meaningful reform’ but not deliver any amelioration or genuine improvement for consumers. The construction of the Domestic Building Consumer Protection Reform Strategy was the outcome.

Of course, the ‘strategy’ appears to have been aimed at calming the disquiet, placating the media and the community and most importantly, pretending to deliver some improvement in consumer protection. Those responsible officials rose to the challenge, cleverly crafting a set of stratagems, utilizing illusion to feign ‘real reform’ and better protection for consumers. As a close examination of the scheme reveals, the officials managed to go beyond ‘no reform’ and ‘no improvement’ for consumers. They excelled in ‘strategic thinking’, exceeding all consumer expectations, such that if this proposed ‘reform’ is fully enacted, building consumers will be worse off than under the current ruinous regime.

The last official statistics from Consumer Affairs Victoria in its Consumer Confidence and Market Experience Study 2010-2011 were shocking. We learned that 256,000 building owners, or 40 per cent, suffered financial damage in one year. This is without considering all the other serious harm to owners – work, health, relationships, families and loss of ‘normal’ lives. This detriment totaled in the billions of dollars just for 2010. Building is by far the worst consumer market sector in Victoria, causing the greatest damage to owners and their families, year in and year out.

Five years on in 2015, we know that this disaster is far worse than in 2010. It may be 300,000 or 400,000 owners who are negatively impacted in 2015. Whatever the number, it is scandalous. It is inexcusable that there is no political will to initiate genuine reform, to protect those that fund the building industry and drive the Victorian economy.

Beneath the cleverly crafted marketing and the splendid spin contrived to sell the Consumer Protection Reform Strategy, what is uncovered as ‘reforms’ are exceedingly ‘unreal reforms’, with present and future consumers’ outcomes as per the ‘strategy’ fated to be even worse than under the current dysfunctional system.

The word from industry repeatedly is “everyone knows, but no one cares!” This reflects poorly on a society where the credo isg “greed is great!” Worse still, it is a sad indictment on those in positions of power and privilege, those who are paid by owners, not out of the taxpayers’ purse, and those who we have elected to govern in the interest of the greatest good for the greatest number.

For building consumers who pay all the pipers, if they were in any other consumer market sector other than ‘domestic building’, as payers of the pipers, they would be calling the tune!

FavoriteLoadingsave article


 characters available
*Please refer to our comment policy before submitting
  1. Branko

    Another great article Anne!
    It must be obvious that there is no political will to change anything because there are too any fat snouts feeding from the trough. As with any system that is corrupt and does not work it must be brought down.
    Nothing will change until 10,000 extremely mad homeowners demonstrate and smash down parliament doors and force the change.

  2. David Chandler

    Anne, Your articles point to a significant issue which should concern the voting public and a industry that has got it mostly right for so long. Unfortunately the horse looks to have bolted. With governments long past the date where they employed the talent needed to help turn this deteriorating situation around a new approach will be needed in my view. As you report the industry is now in the hands of many conflicted parts. Not all intentionally doing the wrong thing, just not fully understanding that the sum of the parts must add up to the whole. This lack of end customer insight or interest is the core issue that allows the bit players to play with all care for their bit but immune from the rest. "Not my patch," they say. It will be a bold public or elected official who would know what to do next in the face of powerful advocacy that wants any response to these issues to accommodate all of their members, which mostly are able to join at the door. Once in the club one rarely if ever hears of expulsion, just more accommodation for the weakest. Industry warranty insurance is an example where one price fits all as a result. Can you see the bottom coming? Its a race.

  3. Dick Gower

    Anne is correct in her statements. Speaking from experience, there are fundamental flaws arising from the deregulation and consumer protection is non-existent.

  4. Andrew

    Once again Anne has hit the nail on the head. It is incredible that an industry that drives the economy of Victoria has been so disastrous for so many families and all the government does is make it harder for the people that are affected to get what they pay for.
    The system needs to be changed from the top down with genuine consumer representatives on the panels that make the strategy for this industry. The whole system needs to be changed starting with the registration of builders, so that the cowboys are weeded out.
    If all builders are good builders then the rest of the system would not be needed and all the money spent on these government departments, that do nothing, could be spent on more worthwhile projects.

  5. beverley-jane

    Consumers are not being heard and protected due to shockingly inept regulators and disinterested politicians. Shonky builders are bolstered and protected by all too powerful industry associations and bodies. The only way forward in my opinion is for consumers to play the same game by paying a 'legal insurance' fee into a fund which allows them access to a powerful legal firm prepared to take on these bullies in court/hearing situations. A consumer protective building contract is essential and could possibly be incorporated as part of the 'legal insurance' package. It is abundantly clear that our government and regulators will not defend the victims in this money making, recalcitrant industry.
    Having been through this diabolic building process, I would be more than willing to pay up front for a fair contract with strong legal backup in the event of being exposed to another devastating building nightmare. Certainly more honest and viable than the sham Builder's Warranty Insurance we are forced to contribute to!

  6. Branko

    Anyone building a home and waiting for government to protect them will grow old. In meantime their biggest investment is at risk. So what can they do? Take control! How? Look around and find independent building consultant that specialises in building stage inspections. These are critical points during build and serve two purposes. Firstly it is to inspect and report on any defects with instruction to correct to avoid defects being built in. Secondly it sent a message to the builder that you have someone professional that looks after you and you should get a better job. I have been doing building stage inspections for over a decade and invariably get from A-Z with minimum of fuss.
    1 Pre contract review, your most important inspection because if you sign off on a bad deal who will help you?
    2 Pre slab inspection, overview of excavation and preparation works
    3 Frame Inspection, frequently I find frame defects after they are passed by building inspectors.
    4 Pre plaster Inspection, your last chance to spot and rectify before it all is covered up (frequently found: damaged structural members by other trades)
    5 Pre final- defective, incomplete, non conforming, non compliant work

    • beverley-jane

      Good in theory Branko but the reality is many inspectors/consultants are failed builders. Our 'Wonderboy' a prime example of this since his temporary suspension, liquidation, multiple warranty claims and delivering our home with 140+ defects! (Building Practitioners Board report)
      Homeowners don't venture into this nightmarish undertaking too often and are at the mercy of smooth talking conmen promising monitoring, reassurance and competence then escape accountability via liquidation when their deficiencies result in devastating consequences for families.
      Registration is handed out without checks on competence, good character or prior track record.
      Failed and liquidated members permitted to re-register after short periods of time. Where is the supposed consumer assurance of registration under these circumstances?
      Regulators don't regulate and disciplinary histories are hidden, preventing viable due diligence checks by consumers.
      Warranty claims records kept from consumers supposedly to protect the privacy of these conmen.
      How do you suggest consumers ensure their 'inspector', 'consultant' or 'builder' are competent and not just another link in this industry's gravy train?

  7. Bruce Christopher

    Agreed Anne that this is one area which cannot just be left open to market forces. Often through ignorance, as a collective, consumers end up getting what they ask for, even if it's not what everyone needs or the minority wants. Low cost usually trumps quality and suppliers and builders risk becoming redundant if they do not serve the majority.

    Taking an interest, doing homework, checking quality and references for previous projects makes all the difference. Expect to pay a premium for compliant (let alone quality) materials and good workmanship. A good builder should welcome some scrutiny.

    For such a high level of spending I'm surprised more people don't become more active in the project. For those who don't understand the differences then more effective regulations and compliance checks are required.
    Though some builders are shonky and cutting costs due to greed, there will be many I'm sure who are responding to the market demands for low price and buying cheaper materials, which probably should not be on the shelf in the first place.

    Consumers also needs to reflect on their own impact from the disturbing trend of unrealistic expectations which can drag standards down.

  8. Mark Whitby

    Great overall view Anne,

    Let's not just hope the Governments listen, but let's work toward making them listen. The only question remaining is how does on go about making that happen if the owners do not form some sort of enormous consumer group that they have to listen to?

  9. Anne Paten

    Bruce, your comment raises a number of points. First, you cannot have a deregulated market and 'consumer protection'. The 'policy' makers authorized 'deregulation', devising the legislation/framework, deliberately making both biased against consumers. Second, the governance agencies committed to protecting and rewarding the industry players who rule; with just one of their strategies being information asymmetry, whereby consumers are denied the information to make informed choices – what you call "ignorance". In fact, no matter how much 'buyer beware' homework an owner does, the flawed money-driven system, underpinned by conflict of interest, ensure owners are helpless. Third, regarding your argument that how much you pay determines the outcome, this is irrelevant. Unlike architects who do a degree, building practitioner 'registration' includes most who have no quals or skills; it is meaningless, as are 'references', and the unfair con-tracts, heavily biased in favour of the builder, who has a business relationship with the surveyor, leaving the owner literally and figuratively 'LOCKED OUT'. This issue has nothing to do with unrealistic expectations, owners are totally outgunned!

  10. Anne Paten

    Bruce, I am compelled to add another comment. This issue is about a deregulated market, with no enforcement of any regulations. Owners try to do their ‘homework. They find a 'registered' builder – means nothing; with insurance – they later find out NOT claimable; check references – often turning out to be the builder’s relatives! The solicitor reviews the unfair con-tracts and says nothing. All worthless! As for being active in the project, the cowboy builder has full control – this enabled and endorsed by VBA and CAV. We had the registered, insured, HIA award winning cowboy, and con-tract checked by lawyer. We paid $15,500 a square 8 years ago, landing a monstrous building. We pursued every avenue, through to VCAT, walking away with a loss of another $80,000, the mega defective building unchanged to this day. As for "some builders are shonky", an understatement. In 2010, 1 in every 4 owners, or 256,000 suffered financial loss! Regardless of what owners pay, the united, organized forces always win against the voiceless, powerless owners.

  11. Graeme Doreian

    Basically legal system has manipulated and massaged the 'building system' to ensure their overpaid fees are collected knowing the 'sucker paying' will receive NO SATISFACTION.
    From experience, builders and tradesmen have a duty of care to ensure any job is completed in a tradesman like manner NO MATTER how much a client is paying.
    Builders know the 'system protects them when there appears a conflict between builder and client, builder tells client 'it's my way or the highway,' closes site down and walks away. Consumers helpless and governments/officials don't care.
    Another wall collapse two houses on the brink of falling into hole
    No 6 Branko I would like to modify point 4.
    At this stage a pre electrical inspection, especially the roof space must be conducted with any rectifications addressed before under taking plastering and should apply to any trade installing their components especially in that roof space
    For decades the State Electrical Offices have not conducted wiring inspections on all jobs in roof spaces, which can allow unprotected cabling over ceiling joists not to be rectified, which is what actually killed two young workers during the failed Home Insulation Program

  12. Connie

    How can it be so different in building to anything else we buy? Because no one cares. This is not right and it is time for change.

  13. Mel

    We need genuine change where only competently skilled, ethical practitioners are allowed to operate in the domestic building industry, and compliance with laws, regulations and standards are enforced. This will restore integrity, accountability and transparency to the administration and governance of the domestic building industry. Continuing to ignore the valuable knowledge of consumers who have experienced the downfalls of the current system would be yet another injustice to those already suffering.

  14. Rob

    The law makers and enforcers have a responsibility to consumers and enterprise to weed out the cowboys. We need a fair system for everyone no matter what side you are on, so trust is won back and consumers are happy to invest their money in this field. Consumer satisfaction is very important for growth. If the wrong thing is continually done, it has to catch up eventually.

  15. Sharon

    I have sadly reached the conclusion that it will take a tragedy, something like the Lacrosse building fire with deaths, before any real action will be taken to reform the building industry. Having dealt with those at the Victorian Building Authority, I know that rather than regulate the building industry the Authority works to protect dodgy builders and surveyors at the expense of consumers. The organisation is rotten to the core and beyond reform.