Agents accused of ‘aggressive’ selling of deposit-free options to make up income lost from ban

Agents have been accused of using tenancy deposit replacement products to earn commission, and make up for revenue lost because the tenancy fees ban.

The accusation comes as a tenant has said it was not made clear to him and his partner by the agent that deposit-replacement payments are non-refundable.

One of the industry providers has expressed concerns that some agents are selling some of the products “aggressively”.

The tenant, identified yesterday in a BBC story only as Simon, 23, and his partner were unable to afford the £1,000-plus rental deposit required to rent in Sussex.

“Eager to move quickly, the couple decided to rent through an agency which offered a deposit-free option,” says the BBC.

“It wasn’t until they had already put money down and were going through the paperwork that they realized the monthly fee to rent without a deposit was money they would never get back.

“Simon has been living there for more than a year – and has paid more than £500 in fees so far.

“He feels the agency did not highlight the fee was non-refundable.”

Simon says had it been explained, he would not have chosen to rent without a deposit.

Instead he would have taken out a loan, or saved up for a traditional deposit: “Then at least we would get our deposit money back – rather than it going down the drain.”

The un-named agency has told the BBC that it communicated clearly, and that Simon had signed to say he understood the terms which were “made clear at every stage of the rental process”.

The BBC story quotes Georgie Laming, of Generation Rent.

She said that some tenants feel under pressure to accept a deposit-free option.

Letting agents can earn commission from selling the products, and “schemes owned by agents themselves can also be lucrative,” says the BBC story.

It quotes Laming as saying that some agents see it an income opportunity following the fees ban.

She said that there are now at least eight products on the market, with differing terms, which she said can be confusing.

Some, she claimed, charge tenants as much as £100 to dispute a damage claim – a free which does not exist where traditional deposits are held in a government-backed scheme.

Former ARLA president Peter Savage, spokesperson for provider Zero Deposits, yesterday afternoon said: “ We have been emphasising the importance of 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.”


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  1. Eric Walker

    I spoke to a tenant who lives next door to a friend of mine. Their rent is £1200 pcm. They have been paying £65 pcm for 2 years for a deposit replacement offering from their managing agent. That’s £1560 They didn’t ask for it, they were advised ‘why have nearly £2k tied up when the landlord is quite happy with this scheme. Have a holiday instead!’ For whatever reason, these tenants think they will get a repayment and will not face any deductions. When I explained, they were very sure I was mistaken. They sincerely believe they were just paying their deposit on a monthly basis rather than being charged a non refundable sum.

    1. mmmm

      Seems likely that this is going to become the next mis-selling scandal.

      1. Eric Walker

        For the avoidance of doubt, this scheme wasn’t one of the very compliant regulated schemes with FCA approval. I have no complaints about them unless poorly sold. This scheme was provided by the agent themselves.

  2. Will2

    Simon couldn’t believe his luck not having to pay is deposit. If seems to be too good to be true it usually is.  Would anyone sign up to an ongoing commitment without understanding what they are entering into even if they don’t read the small print.  Mind you it sounds sharp as some schemes only require an annual fee no where near this level and the fee ban does not allow selling compulsory insurance but you can advise such insurance is available and accepted by some landlords.  All sound odd to me.  If he didn’t believe his luck why did he?

  3. Oliver Wharmby

    Now the schemes are reasonably established, PI insurers have seen a spike in claims relating to miss-sold deposit replacement products and are increasing excess/deductible levels to compensate in anticipation of more claims to come.

  4. LetItGo

    never underestimate how stupid some people are

    1. LetItGo

      Simple Simon?


  5. Simonr6608

    Something I have highlighted several times and until these schemes are regulated we will hear more of these stories. 0 deposit schemes are a disaster waiting to happen, they are being sold by agents as insurance schemes when in fact they are not. No doubt we will hear from the scheme providers about how they go to lengths to make sure this isn’t the case and that they offer the landlord and tenants protrection but in reality all they do is make provider and agent money.

    1. CountryLass

      And that is why my company refuses to use them. Over the course of a couple of years, most Tenants would end up paying more and would not get their money back. I don’t care how much we would make from selling it, it’s going to cause trouble down the line and we want no part of it. We have used the Council’s bond scheme if a Tenant on benefits comes to us using it, but that is offered and dealt with through the council and we don’t have anything to do with it.

      1. Simonr6608

        I also don’t use the schemes in their current format, I do believe they will have a place at some point but only when they are regulated and transparent which at the moment they are not. Had they been around when I started my rental I would have paid nearly £3000 to date instead of the £900 I paid as a cash deposit.

  6. NotAdoctor32

    “I couldn’t believe how good it is, so I signed is without doing any research”.

    If anyone has Simon’s address, I have some magic beans I’m looking for a good price for.

  7. Woodentop

    Zero deposit schemes should be banned. Period.

    1. cricket1

      There also should be a ban on the wording deposit-free. The terminology is confusing and it’s just preying on people. Also all deposit schemes should be really upfront with which estate agent they are being funded by. Deposits do need to change but it feels like the first ones in are making it even worse. There are some tech startups that are using open banking for deposits or reporting checks which may be a better way to do deposits but yet to see a frontrunner.

  8. RentBoy

    Lets be sensible about this.  We all know that despite how much we ask tenants to read everything, they don’t.  No-deposit schemes take advantage of this.  We should not be selling it on this basis.  It’s no wonder we are not trusted.

    1. CountryLass

      That’s why I email out my AST’s a few days before hand with instructions for the Tenant to print it off, read it and initial the bottom of each page when they have read it, and bring it with them when they come in to collect the keys and sign it.
      At least that way they cannot claim they were not given enough time to read it!

  9. AgencyInsider

    Rather like payday loans at hideous interest rates, I find these deposit schemes not to my taste.. But that does not mean they do not have a place in the market. Providing there is complete transparency and full explanation to the customer of what they are signing up to, then grown-ups should be allowed to make their own choices.

  10. J1

    Would anybody like any free cash??

    Simon’s your man…………………..

    These schemes are another opportunity to give agents a bad name……………..


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