When a backer is an expropriator: pitfalls in the consumer protection mechanism for off-plan building sales in Vietnamese law

Purpose To motivate investments in housing projects, the state may allow private entities to mobilize capital through selling off-plan buildings and use proceeds to complete the project. The state senses the risks for consumers in these projects: frauds certainly occur. To safeguard consumers’ interests, the Vietnamese Government requires developers to obtain a bank's refund guarantee to sell off-plan. This paper aims to point out how consumers are marginalized due to the mechanism (mechanisms) dedicated to protecting them. Design/methodology/approach The authors review the legal regulations in Vietnam, contracts in transactions on which they have given legal consultation (the authors leave the information anonymous for privacy issues), and real disputes exposed by newspapers re: off-plan sales. Findings 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. Originality/value Bank's refund guarantee’ is a recent initiative of the Vietnamese Government, offered to safeguard consumers’ interests in off-plan sales. Issues arising thereupon have not yet been fully exposed, especially, in conjunction with a broad view of the Vietnamese legal system. The analysis and critiques offered by this study may have policy implications for other jurisdictions as well.