Can we really trust Consumer Affairs to look after our interests?

Consumer Affairs or the department of Fair Trading is the governing body in most states that is there to protect the consumer across a variety of industries and transactions.

In Victoria, Consumer Affairs Victoria (CAV) are the ‘leading’ consumer affairs protection agency and regulator. Their purpose is to help the public be responsible and informed businesses and consumers.

• They review and advise the state government on consumer legislation and industry codes
• They advise and educate consumers, tenants, businesses and landlords on their rights, responsibilities and changes to the law
• They register and license businesses and occupations 
• They conciliate disputes between consumers and traders, and tenants and landlords 
• They enforce and ensure compliance with consumer laws

This is all wonderful for the consumer, however what is most disturbing is that like many government run organisations, they aren’t in any way accountable to the consumer.

Let’s look at the process of a consumer lodging a complaint against a real estate agent or agency and then compare it to what happens if that same consumer were to lodge a complaint against a financial planner with the financial ombudsman service (FOS).

The CAV website explains when to lodge a complaint, what conciliation is and the forms to use when lodging a complaint. There is nothing, however, that identifies the steps CAV will take or how your complaint will be handled or resolved.

In Victoria, most consumers make a phone call to CAV and the complaint is discussed. When personally testing the process and after discussing the matter, I have been required to hang up and lodge a written complaint, addressed to Consumer Affairs and to no one in particular. Having followed that process, nothing was ever sent to me to confirm that they had received my complaint, no complaint number was issued and no contact from CAV was ever made in relation to what was going to happen re the matter I reported. It actually so happened that I reported a financial planner who I knew had obtained his real estate licence fraudulently.  Apparently CAV didn’t deem that worthy of investigation as 18 months later, the financial planner still holds his real estate licence.

Recently, while testing the process again regarding a different matter, I was able to give the details of an unlicensed and active real estate agent and when I requested a case number or to be kept notified of the outcome, I was told no case number would be provided and that due to ‘privacy reasons’, the only way to check the progress of the matter, if in fact there was to be any investigation or action taken at all, was to check the public updates on the CAV website. In other words: "Thanks, but we will tell you nothing from here, we may not even pursue the matter if we deem it not worthwhile or sufficient enough of a breach to worry about."

Scary, isn’t it?  Even worse, CAV are quick to tell the consumer they are in the marketplace investigating and keeping an eye on things. For example, in the lead up to the Easter 2014 auction season, director of CAV Claire Noone announced they would be “watching for any misconduct during the buying and selling process - from the moment a property is advertised to when deposits are paid and held in trust accounts. Our staff will also attend auctions to make sure they are conducted according to auction rules.”  

Announcing this type of crackdown publicly is the equivalent of the police announcing they are about to raid active bikie gangs in the state in the coming weeks, thereby giving them plenty of notice to hide any illegal activity. Other than pre-warning agents to prepare for a raid, CAV accomplished nothing other than trying to highlight they are doing the job (poorly, it seems) that is expected of them.

Not surprisingly, as a result of this ‘early warning’ announcement to the industry, the crackdown on underquoting revealed a "close to 100%" pass rate for agents of what was a biased investigation ( only property with prices disclosed on advertising were investigate). This was despite a new poll suggesting more than half of agents admit the practice is a problem for the industry.

In the latest Real Estate Business straw poll, it appears the industry believes things are much worse than they are. Of the 368 respondents, 47.6% said underquoting was a major problem in the industry, while 17.9% said it was an issue but wasn’t too bad. A total of 19.6% said it was not a problem, but admitted it happens, while just 10.6% of agents believe there is no active underquoting in the industry.

Victoria needs to follow the lead of South Australia and introduce regulations to stop underquoting. 

Back to Consumer Affairs accountability to the consumer.

My initial investigations with CAV and the media manager at the Department of Justice as to how many staff monitored compliance of section 18 of the ACL or section 131 of the CCA yielded the following statement:

“Australian Consumer Law is such a major part of Consumer Affairs work and has been integrated across the business - policy, inspection, legal, customer service and so on - a head count would not be … meaningful.”

My research since has gleaned that there are approximately 30 investigators working in CAV with approximately 6 dedicated to investigating the real estate industry.  For the year 2013, there were 82,981 Melbourne metro sales, with 30% (24,895) sold by auction and only 6 possible dedicated investigators! 

The CAV 2012 – 2013 annual report shows 9609 calls were made regarding estate agents and the fifth highest number of complaints were about ‘misleading and deceptive conduct’. They did however “attend 15 property auctions in St Kilda and South Yarra in April. A similar compliance exercise was completed in December in the Bentleigh area.”  Disappointingly in this report, there is no reference to how many investigations were made further to these calls, but 309 estate agent disputes were ‘finalised’.

Now let’s compare the complaints process at FOS.

Firstly, when you go to their website, they have a dispute handling process clearly identified. They don’t just tell you how to lodge a complaint or when to, but the steps and process along the way.

"Step 1: Contact your financial services provider
Step 2: Lodge a dispute with us (complainants will be issued with a case number and case manager to liaise with throughout the course of the complaint process. Timeframes to handle the dispute are identified upfront).
Step 3: Our review of the dispute begins
Step 4: How your dispute will be handled
Step 5: How your dispute will be resolved"

Source: FOS

The process of protecting the consumer and regulating the industry cannot be left to CAV. They are patently understaffed and under skilled to be monitoring matters that involve consumers spending hundreds of thousands and even millions of dollars of their hard earned income.  

We shouldn’t trust that Consumer Affairs is looking after our interests in property matters.

It’s time to remove this sector of governance from CAV and to set up an independent board of consumer and real estate industry representatives that prides itself on objectivity, integrity and transparency in all aspects of its operations, like FOS.

Miriam Sandkuhler is the founder of Property Mavens - a specialist property advisory firm based in Melbourne. You can support the introduction of new legislation around underquoting by signing her Victorian petition here.