Suppliers themselves are admitting that there has been mis-selling by agents of tenancy deposit replacement products.
One provider has revealed that it has dropped agents for mis-selling its product or pressurising tenants. It also asked for agents to be ‘grassed up’ where there are suspicions of mis-selling.
Another supplier has claimed that there is a mis-selling of some insurance-based products, even where they are regulated.
The new concerns follow a BBC investigation which suggested that some letting agents are not making it clear to tenants that payments for replacement products are non-refundable.
Generation Rent has also levelled the accusation that some agents are focused on earning fees out of the sale of these products, to make up for revenue lost because of the tenancy fees ban.
Eddie Hooker, group CEO of Hamilton Fraser which operates both a traditional deposit scheme, mydeposits, as well as a replacement product, called ome, said: “We consider it important to ensure that tenants have full choice as to whether to find a traditional upfront deposit or to manage their cash flow by opting for a deposit replacement product.
“However, tenants must always be fully aware of the terms and conditions of whatever choice they make.
“With a traditional deposit, this means reading the tenancy agreement to understand when a landlord can deduct monies from their deposit, and for a deposit replacement they understand that they will always be responsible for deductions at the end of the tenancy even though they will have paid a fee for the product.”
He said: “My issue has never been with the replacement products themselves, rather how they are sold and by whom.
“I’m not sure that all products put the tenant at the heart of the decision-making process even though the law states that tenants must be offered a choice of both a traditional deposit and a replacement product.”
Separately, a spokesperson for deposit replacement provider flatfair said: “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.
“From the outset, we offer a clear sign-up process where tenants have to agree to statements making it clear of our offering, including the fact that the membership is non-refundable and is an optional alternative to a traditional deposit.”
“The BBC article refers to insurance solutions, which despite being FCA regulated are being mis-sold.
“Some insurance solutions count estate agents among their investors, which removes any sense of independence.
“Rather than being an insurance product, flatfair is independent and built upon the latest payment technology, which means tenants can rent their home through just their debit card – in much the same way as you would checking into a hotel.
“Although flatfair was not the subject of the BBC 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.”
Jude Greer, co-founder and CEO of Reposit, said: “When we founded Reposit in 2016 as the first deposit alternative offering in the UK, we believed that FCA regulation, security and transparency had to be at the core of our business.
“This is ingrained to the very core of how our company does business. Because we are FCA regulated we are audited regularly to ensure that we treat our customers fairly and clearly communicate our product.
“We consistently endeavour to provide the highest standards of training to our partner agents to minimise any misinformation or mis-selling. Tenants are provided with detailed marketing materials and our full set of TC’s is publicly available.
“To maintain our high standards, Reposit has cut off partners from using our product when it has been mis-sold or when tenants have been pressured into choosing Reposit.
“However, we can only speak for ourselves. Whilst most providers look similar there’s a huge variation in the levels of regulation and transparency, which is not only a threat to the entire industry but can be very confusing to tenants and agents alike.
“We therefore ask agents to do their due diligence in order to make an informed decision for their customers.
“If you know of Reposit being offered without all the right information being shared prior to signing, please contact our team.”