Agents told to prepare for ‘crescendo’ of complaints over deposit replacement schemes

The Property Ombudsman has warned agents that complaints about deposit replacement schemes could start coming in during the next six to nine months.

Property ombudsman Katrine Sporle said TPO’s consumer forum is frequently being asked to look at deposit replacement schemes.

Speaking at yesterday’s TPO conference, she said: “There are the start of murmurings that will get into a crescendo maybe in six or nine months of people saying they simply didn’t understand they were just being required to pay for the privilege of not paying a deposit.

“You need to make sure you are on top of what you are doing as complaints will come further down the line.”

She also urged agents to sort out issues regarding dual fees between themselves before charging and involving a consumer.

Sporle also revealed that it was not taking forward a mediation service it had been trialling for six months after it received just 72 referrals.

She said: “The level of referrals isn’t enough in the context of the 29,000 inquiries we receive.

“By the time people were coming to TPO it was too late, as there was already a stand-off with an agent.

“We need to get to consumers earlier if we want them to use mediation. We remain convinced that mediation is a good way forward.”

She said TPO was still keen to work with Mediator Network which provided the service.

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  1. LetItGo

    TPO are so out of touch it makes you laugh. Most organisation that regulate tend to lean towards the complainant rather then the defendant and the TPO are top of the tree. They have so little idea of what actually is happening in the industry its embarrassing. 29k enquiries out of millions of lets….a drop in the ocean. The majority of the complaints in sales are due to the ignorance of the vendor complaining about dual fees. Landlords still don’t get the value of an agent and think they are right, few question the integrity of solicitors – bring on legislation, maybe our credibility will be elevated to the professional service the majority provide at the smallest possible fee. The industry is doomed whilst the low fee monkeys are still in the industry – you cannot operate a successful business on minimum wages

  2. Simonr6608

    I’ve been saying this ever since the schemes came to the fore, 0 deposit scheme are designed to give agents a commission and make the underwriter money. They have nothing to do with protecting the tenant or landlord and may well end up costing them more.

  3. ChumpExecutive

    These schemes provide the landlord with insurance cover against damage & loss of rent but ask the tenant to pay the premium. There is no insurance cover for the tenant. When the FCA wakes up to the fact that industrial scale mis-selling is going on then the agents who are up to their necks in these schemes will take a big hit to their balance sheet – they will have to refund the tenant’s their premiums and ask them nicely to put a cash deposit in place instead! Meanwhile the landlord will rightly say “but you told me Mr Agent that I was insured for these losses, so if I suffer a loss you have to compensate me”. As I have repeatedly said, these are akin to Ponzi schemes and while the cash is flowing into them currently when the claims come in 12-18 months they will be stress-tested.


    1. Ian Narbeth

      “There is no insurance cover for the tenant. When the FCA wakes up to the fact that industrial scale mis-selling is going on then the agents who are up to their necks in these schemes will take a big hit to their balance sheet – they will have to refund the tenant’s their premiums and ask them nicely to put a cash deposit in place instead! ” Any insurer who provided cover “for the tenant” against the tenant’s own default would be insolvent within a year. It’s a pity many tenants (and it appears Housing Minister James Brokenshire who is in the process of tinkering with deposits) don’t understand the concept of moral hazard. You cannot expect an insurer to pay out £1000 for a £20 a month premium and NOT have recourse to the tenant. If the insurer did so, it would be obvious tenants would default left, right and centre leaving the idiot insurer to shell out.
      ChumpExecutive, you may be right that the FCA will come after agents for mis-selling. To avoid that agents need to explain to tenants that they are still liable to pay rent and for any damages – they are simply paying a monthly premium for not having to stump up a deposit. It won’t be welcome news to the tenants. If the agents don’t understand how this insurance works they should not be offering it to tenants.  

  4. Jason Coombes

    Our firm will not sanction these schemes, neither will we accept tenants using one. I note a few comments on here are attacking agents selling these products, in many respects you are right to do so, but let me remind everyone, It’s an insurance product, under proposed changes – yes, yet more legislation, the agent will be required to disclose to the landlord and tenant the commission that they are earning from the sale of said product (already required if you are RICS), despite the agent introducing the policy, the person buying the product i.e. the tenant – not the landlord, is the policy holder – good luck negotiating payments with an insurance firm on behalf of your landlord client. Think on that, we all now how difficult insurance firms are to deal with. My advice, take normal deposits, register them correctly and steer clear of these products.

    These products are doomed – and will quite rightly become the focus of the TPO the more landlords , agents and tenants come into contact and complain; I have no doubt that further down the line these products will become the new focus of PPI style locusts.

  5. Penguin

    I completely agree with Jason –


    I won’t touch them as I’m sure they are the next PPI scandal waiting to happen.

    Take a deposit.

    Protect it properly.

    Job done for everyone.

    1. Ian Narbeth

      Jason,  You should look at the Government’s plans (Google Tenancy Deposits Call for Evidence) for “passporting” deposits from one landlord to the next BEFORE the current tenancy has ended. There is a consultation going on but I suspect the Minister has made up his mind to DO SOMETHING and we will have a half- ar**d scheme which will render deposits all but useless.
      Landlords will then want additional security and tenants will either have to provide a guarantor or use an insurance product. I forecast that more of these insurance products will be sold in future than presently.

      1. Jason Coombes

        Hi Ian,

        Already have and sent a response to James Brokenshire, strongly highlighting the shortcomings in his proposal, I also included ARLA in my response, got a great reply from ARLA, nothing (third week in now) from the Rt Hon….what a suprise….I do agree with you, something ill thought out and completely half arsed will be forced upon us.

        These schemes are appalling and will not work, they are not the answer, but I fear you may well  be right. The next step would be the Secretary of State stopping deposits altogether (as per the Tenant Fee Act).




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