The way in which tenants are referenced in the UK is broken, according to the boss of a start-up offering “tenants’ passports”.
Peter Ramsey, founder of Movem, claimed that the public was unaware of how the system is broken “or don’t care that the result of the existing process is worthless”.
He also highlighted how the cost of reference checks was inflated first by reference companies, who can produce them at a cost of “pence” and then letting agents as they both upsold them.
He asserted that reference checks were often flimsy because companies aren’t incentivised to make them “bullet-proof”.
In an article in Medium, he said: “Referencing companies wouldn’t want a 100% success rate of filtering out bad tenants, or they’d never sell their insurance.”
He added: “You need to know that a tenant reference, right now, isn’t a ‘complete know your tenant’ check at all.
“It’s more of a ‘yeah, based on these factors they haven’t screwed up so far, but really we have no idea what they’ll be like, so buy our insurance just in case’ check.”
And he cited examples of how flawed the checks were, how companies often just took the information provided to them at face value, and how easily it could be manipulated using computer software.
Ramsey used, among others, the example of a reference request from an unnamed, award-winning letting agency he received in relation to one of his own employers.
It asked questions about whether or not he employed the individual, when they started employment, requested details of their salary, and asked if they were honest and trustworthy.
Ramsey said he replied but added that his replies were effectively worthless.
He said: “As far as they’re concerned, they’ve verified that Paul is employed. But they haven’t, have they? All they’ve done is get a response from the email account Paul said was his employer.
“Whilst at university I knew somebody who gave his own mobile number as his employer, said he was on £40k a year, replied to the email himself posing as his employer, and passed.”
Of course, Ramsey has his own service to promote and suggested that Movem could help fix the system he claims is broken.
He said: “At Movem, we’ve created the first instant tenant reference that verifies income and previous rental payments directly with the applicant’s bank, using data provided by Open Banking.
“I have no doubt that in five years the vast majority of tenants will be referenced in this way, and rental decisions will be made based on the access and interpretation of raw data.
“The call centres will be empty.”