A leading campaigner on improving standards in the property industry has raised questions in the House of Lords about the newly approved third redress scheme.

Baroness Hayter demanded to know why a profit-making company had been chosen.

The Property Redress Scheme (PRS) has been approved to operate in both sales and rental sectors, and is run by insurance broking firm Hamilton Fraser.

Baroness Hayter also expressed concern that the scheme would accept letting agents expelled by the other two property ombudsmen.

She made her remarks in a debate on the Order to make all letting agents belong to an approved redress scheme.

She said: “It is clear that redress systems themselves cannot, of course, enforce their awards.

“If a letting or managing agent does not implement an adjudication, all the redress scheme can do is de-list the agency.

“The two existing schemes have an agreement that they would not take on an agency which has been debarred by the other, which is a pretty essential requirement to aid enforcement.

“Can the Minister tell the Committee whether the new, third scheme will undertake not to take on an agent that has been debarred from one of the existing schemes for not abiding by an adjudication?

“Without that, there will be no enforcement – unless the Government have something else up their sleeve they have not yet told us about.

“Can the Minister also tell us whether the new, third scheme will operate to an existing code, which the other two obviously already work to? What thought has been given to consistency of outcomes, which the two existing schemes strive to achieve?

“On the selection of redress schemes, outlined by the Minister in her introduction, could she explain why, for the very first time in the development of statutory requirements to belong to an ombudsman, a profit-making body has been approved?”

Replying for the Government, Baroness Williams said: “All the three approved redress schemes have agreed to work together. They have the power to share information with the appropriate regulatory bodies and with each other to ensure that rogue agents do not play one scheme off against another.

“Should one of the schemes expel an agent, they must set the conditions for readmittance of that agent and tell the other schemes. An agent must then meet those conditions before they can join any of the schemes.”

She said of the decision to approve schemes: “The schemes were selected as they all met the conditions for approval, including demonstrating that they are independent, fair, effective, transparent and accountable.

“The first two are existing schemes, as the noble Baroness pointed out, which between them already have 60% of the total 11,560 agencies as members. PRS is a new provider but is very much open for business.”

Baroness Hayter responded by saying that the minister had dodged the question: “The Minister has not commented on the use, for the first time, of a private for-profit company. I assume she took my comment as a comment rather than a question. I would be interested if she could respond to that but, if not, I will let it lie on the table.”

Meanwhile, in the Commons, concerns were also expressed whether the forthcoming requirement for letting agents to belong to a redress scheme will have any real teeth.

Debating the Order in the Commons, a member of the Legislation Committee, David Heath (Liberal Democrat MP for Somerton and Frome) said: “Am I right in thinking that if a company is not a member of a redress scheme, although it may be subject to a fine, there is no requirement for it to cease offering its service while the fine is outstanding?”

He went on: “The only penalty will be the monetary one … and there seems to be no requirement on the company to cease trading or offering a service to potential customers, whether tenants or landlords. It would be in receipt from those landlords and tenants, who would not then have the protection of a scheme.”

Another MP, Andy Sawford (Labour, Corby), said: “While a mandatory redress scheme is to be welcomed – after all, more wrongs will be righted as a result – it will do little to prevent unscrupulous agents from ripping off tenants and landlords in the first place … redress does not go far enough.”

However, the Draft Redress Schemes for Lettings Agency Work and Property Management Work (Requirement to Belong to a Scheme etc) (England) Order 2014 has now been waved through by both Houses.