A BBC investigation into alternative deposits schemes has highlighted how agents can get into problems if they don’t make the terms of such deposit deals clear to tenants.
Published yesterday, the investigation looks at the half a dozen different alternative deposits schemes that can be offered to tenants both through agents and landlords. It also features criticisms of alternative deposit products both from unhappy tenants and campaign groups such as Shelter and Generation Rent.
They say the variety of different schemes and their differing models mean many tenants are confused about what they are committing to when signing up to these deals.
The key plank of the criticisms is that tenants do not understand that, unlike a traditional deposit, alternative deposits schemes charge them fees which are non-refundable, even if they are a lot less than the traditional deposit would be.
These fees can either be one-off charges that often represent a week’s rent, or monthly fees that can mount up.
ARLA Propertymark Chief Executive David Cox is quoted in the report saying that although he welcomes products that help ease the financial burden of rental deposits, he urges agents to ensure tenants understand the fees are usually non-refundable.
One of the better known schemes, Zero Deposit, has released a statement.
Industry spokesman Peter Savage (left) says: “We have been emphasising the importance of Financial Conduct Authority (FCA) regulation since we launched in 2018.
“We are deeply concerned that unregulated products can be sold freely and aggressively to tenants and this will lead to more complaints and adverse publicity, damaging the reputation of agents in the process.
“We urge agents and landlords to act responsibly and choose to partner with only FCA regulated deposit replacement products, along with their associated protections and safeguards.”
Flatfair, another provider of alternative deposits, has distanced itself from the BBC investigation. Its spokesperson says: “Although flatfair was not the subject of the piece – and was not used by the customer featured – this highlights the importance of our mission to drive a fairer, more transparent and accessible rental market that everybody trusts.
“It is key that consumers need to be able to make informed choices, especially in an industry which is still in its infancy. What needs to be made crystal clear is that there is a key difference between insurance solutions charging tenants excessive or recurring fees and payment technology companies like ourselves who offer tenants a transparent one-off fee without hidden costs.
Read the BBC report in full.
Read a recent guest blog on alternative deposits.