The Government has launched a review into Client Money Protection and whether it should be made mandatory for letting agents.

Depending on the responses, mandatory CMP could be added into the Housing and Planning Act 2016.

The review estimates that 60% to 80% of agents voluntarily have CMP.

However, the consultation document from the Department for Communities and Local Government makes it clear that the Government is less than lukewarm about making CMP mandatory.

The document goes on: “The Government’s concern about making CMP mandatory is that requiring agents to pay to belong to a scheme would force honest agents to buy insurance against themselves being fraudulent. Something the vast majority of agents are not.

“There are two main reasons why a landlord or tenant could lose their money which is held by a letting agent. The first is that the agent is fraudulent; the second is that the agent has gone bankrupt.

“While an agent will not always be aware that they are about to go under, client money held in registered client accounts agreed in advance with the bank will be protected and returned to the client rather than used to settle the agent’s debts.

“This is standard business practice and not expensive, so good agents can protect their client’s money without having to join third party insurance arrangements, which could result in higher rents for tenants.”

Currently, under the Consumer Rights Act 2015, letting agents are requirement to display in their offices and on their websites their fees; whether or not they are part of a CMP scheme; and which redress scheme they belong to.

The consultation document goes on: “It was the Government’s view that with this, the balance of regulation for letting agents was about right, and we need to allow time for the transparency measures to bed in.”

However, the document says that during the passage of the Housing and Planning Act 2016, it became clear that there was broad support for taking action on CMP specifically.

Therefore, the Government has taken the power to make CMP mandatory if a working group demonstrates it is necessary. The working party is led by Lord Palmer, Lib Dem, and Baroness Hayter, Labour, who co-signed the consultation document along with housing minister Gavin Barwell.

The consultation asks 17 questions, including asking for information on CMP, whether it should be mandatory and if so, would it affect rents.

The consultation runs for six weeks.

It has been welcomed by industrybodies NALS and SAFEagent.

Isobel Thomson, chief executive of NALS, said: “NALS wants to stamp out the illegal and fraudulent practices that put tenants and landlords at risk and tarnish our industry’s reputation. We have long argued that to protect the consumer, all letting agents must be covered by a client money protection scheme.

“We’re delighted to see this review, and that the Government has recognised  SAFEagent’s excellent campaigning for full and mandatory CMP.

“NALS will be responding fully to the consultation to inform the argument that all agents should be covered by CMP, and we urge others to do so too. We hope this review will finally lead to mandatory CMP for all letting agents.”

John Midgley, chair of the SAFEagent Steering Group, said: “We very much welcome the Government’s review. Clearly, the SAFEagent campaign has given impetus to Government reviewing this issue. Quite simply, the industry wants it, and all members of licensing, professional and trade bodies already have it.

“It’s worth adding that cost is not an issue here. The Government should recognise that the cost of CMP is a small price to pay by an agent who genuinely wants to protect their clients and consumers.”