When a backer is an expropriator: off-plan building sales in Vietnamese law

What is it about?

Off-plan sales have emerged and increased rapidly worldwide in recent years. Such sales can be risky for consumers in view of fraud. To counter risks, states may invent some consumer protection mechanisms. In civil law countries, the refund guarantee from financial institutions has been put in place to safeguard consumers' interests. In Vietnam, banks are the only actor that can provide refund guarantees. In this paper, I point out how consumers are marginalized due to the mechanism (mechanisms) dedicated to protecting them within the context of Vietnam.

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Photo by Pedro Lastra on Unsplash

Photo by Pedro Lastra on Unsplash

Why is it important?

Our finding shows how unskillful policy-making can turn into disastrous. Within the context of Vietnam, the mechanism of bank refund guarantees cannot function properly. This paper argues that the measure fails for two reasons. First, there are many weaknesses allowing banks to avoid this mechanism. Second, banks lend to developers, and as such, play the role of a secured creditor. In these situations, there is a conflict of interest between the bank's roles and between the bank and consumers. Moreover, Vietnamese law, by endowing banks the privilege of seizing and obtaining possession of collaterals, may put aside consumers' interests. The roots of failures are conflict ideologies between the Ministry of Construction, Law on Real Estate Business and the State Bank, Law on Credit Institutions.

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