These people are not really doing anyone any favors, not even the homeowner. It's the same old flem-flam scam of people thinking they are getting something for nothing and end up getting nothing for something.
If a homeowner enters a contract with a legitimate GC ( one that's been checked out ) they can have a certain amount of security. They can be sure that he/she has a proven track record and that they are insured and are financially sound. These people have an investment in their business.
On the other hand when a homeowner hires "Fred the contractor" on a wink and a nod and agree to pull the permit (homeowner's ) and almost anything goes wrong they are left in a pretty bad situation. They really don't even have much of a legal recourse.
Most people hate government intrusion until they find that they have just been screwed by "Fred" and then they wonder why the authorities don't do something to help the poor innocent homeowner out.
No offense ment to anyone named Fred I was just looking for a common name to use.
I feel the problem is the government incompetence though. You see in Canada, for instance, the level of requirements is far greater than most places in the US yet they have incredible levels of similar problems as we are talking about--back to Holmes on Homes. We could have a long discussion about all this but I believe there is a balance to everything. I saw the union and governmental corruption, firsthand, in Chicago and now here, in southwest Missouri, I see no unions and little or no governmental intrusion---that balance is somewhere in the middle.