Thousands of agents set to break CMP legal requirement ‘after struggling to open client accounts’

Letting agents have just weeks to ensure that they have compulsory Client Money Protection insurance in place – but some 4,000 could be struggling to meet the deadline.

The figure appears to be the Government’s own estimate of the number who do not have the insurance in place.

CMP is currently voluntary, but from April 1 it will be a legal requirement.

In a leaked letter seen by EYE, the Government has expressed its concern that agents are struggling to open client accounts.

The letter says that “changes to the CMP legislation will allow schemes some flexibility” until next year to accept agents without a separate client account.

This was also publicly stated by Lord Bourne during the report stage of the Tenant Fees Bill in the Lords last year.

But one provider we spoke to said yesterday that agents without separate client accounts cannot get insurance: “CMP schemes cannot accommodate agents who do not have a client account,” they said.

The April 1 deadline means that agents without CMP from then on will be trading illegally. They could be fined up to £30,000, together with £5,000 fines for failing to display membership details.

The letter we have seen looks to come from a civil servant within the Private Rented Sector department at the Ministry of Housing, Communities and Local Government (MHCLG).

The letter to the CMP providers says: “We have been in contact with you all individually to ask about your approach to dealing with agents finding it difficult to get client accounts.

“As you know, our changes to the CMP legislation will allow schemes some flexibility to accept agents who are making best endeavours to get a client account until April 2020.

“This is only intended to be a temporary measure until banks are more willing to offer client accounts as the ultimate goal is of course that all client money is in an appropriate account.”

The letter goes on to ask how many applicants in the last six months or so have had difficulty opening a client account, and what type of agents these were.

The letter also asks which banks or building societies are not offering client accounts.

The stated aim of the legislation was to close the loopholes by which letting agents could use client money such as rent payments and tenants deposits as cashflow – or to fund lavish lifestyles.

The requirements were for all letting agents to keep client money separately, and to have mandatory CMP.

Mandatory CMP was always going to be implemented before the tenancy fee ban, so that if any agents went out of business as a result of the ban, tenants and landlords would be protected by insurance.

However, although the introduction of compulsory CMP is now some eight weeks away, there has been silence from the Government on its detail.

The letter that EYE has seen suggests that the April 1 deadline may be a difficult one to meet, if CMP providers refuse to relax their requirement that firms must have separate client accounts in place.

One CMP provider said: “We have the perfect storm: mandatory CMP without the time for thousands of agents to join a scheme, followed by the fee ban on June 1.”

David Cox, chief executive of ARLA, told EYE yesterday: “The schemes are still going through the approval process and as far as I’m aware MHCLG haven’t published any guidance for agents yet.”

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  1. Robert May

    As with the attempts to discuss the practical issues of deposit legislation with DCLG in 2007, the usual brick wall is in place and anyone wanting to  raise salient points is being ignored.


    The lack of  choice of CMP provider for agents with client cash accounts is likely to be more of an issue, but let’s just ignore that, there is provision for CMP, so that box is ticked we don’t need to listen  to you ‘who are you? why are you bothering us? oh you’re not going away are you?’s’

  2. Peter

    Why the difficulty in opening a client account!!!

    1. KC54

      Maybe the credit worthiness of the business.  If client money has been raped, you can bet your life that the rest of the financials are in bad shape.

  3. Settle Down

    Because Banks such as HSBC do not like change. We had a client account for deposits, a current account for incoming rents and payments to Landlords and contractors and a separate current account for our office/business accounts. To get CMP we had to change the current account for rents etc to a client account (ring fenced). We had banked with the HSBC for a considerable time and when we asked for another client account were told NO. When we asked what the solution was to our problem we were told by the HSBC to go to another bank…….. which is exactly what we did. This was both complicated, lengthy and costly to our business, but banks can do as they like…….. Charge Fees for services for example!!!!!

    1. Peter

      I am currently reviewing our banking arrangements, due to the tenant fee ban I am reviewing costs, and HSBC’s charges seem very good so is on the positive list. Having spoken to them, they confirm I can open a client account and they will confirm in writing that this account will have no right of off-set.

  4. LordElpus56

    Genuine question – is there anything special about a bank account that makes it a Client Account, or – as I suspect – will any business current account suffice?

    One presumes that if it’s clear that the money is used only for client purposes, then it is indeed a client account, and you should be able to secure CMP on it.

    1. Robert May

      A client cash account used to be an interest free, bank charge free deposit account that  allowed agents to put all of their clients money into a single account, the  relatively high balance  in the account allowed the banks to lend out the cash as if it were theirs but pay no interest  to the agents who did not have to pay any transaction charges.


      Now interest rates are so low the bacnks aren’t making anything on lending out the cash so a client cash account is a burden to the banks not a useful asset.

      Coomputer says no centralised banking means local bank managers no longer exists in the form  we would recognise.


      These days the manager is someone  our children went to primary school with.

      1. anon-mon73

        I’m sure I got interest on my Client account, those many moons ago (pre-2008).

        I paid no charges and got enough to pay electric bill for the whole office every month (not insignificant).

        How times have changed!

    2. Peter

      Yes, there is something special about a client account, the bank should have no right of off-set, meaning that the bank cannot delve into the client account to shore up the business accounts. I would expect a CMP provider to seek evidence that this is the case and a letter from the bank, stating no right of off-set, should suffice.

      This is what I have.

  5. zenagent81

    When is a client account not a client account ?

    Had the same client account for 15 years, the bank statement has client account printed on it, I was not allowed to pay Cardnet payments into this account because its client account, bank charges on this account are off set to my agency account because its a client account, so how it not a client account.

    Contacted my bank Lloyds ( via the call centre ) I need a letter to confirm its a client account please, as I need set in place CMP insurance and comply with new regulations and be lawful.

    Bank reply Sorry Sir, You don’t have a client account, so the madness begins. 

    Well I need an client like a solicitors client account, so I can pool all clients money and pay rent in and pay my Landlords.

    Bank Sorry Sir, As a letting agent you are not on the FCA listed of approved accredited professionals, consequently you can not have this type of client account ( Un-designated client see below ) you can only have a designated client account.

    This appears to be a classic case of Catch 22, created by government, any agent trying to set in place CMP and trade lawfully needs to check and make sure they do not have the same issues.
    01 Un-designated client account or 2, Designated client account.
    Because the Government does not see letting agents or Estate agents as accredited professionals they are not allowed by FCA rules to hold Un-designated client accounts.  Holding the un-designated client account, allows to pool all client funds in one account which is the way letting agent normally work.  I assume the designated account means you must hold individual client accounts so 200 Landlords 200 (so I am told by the bank) accounts, which creates a huge issue in day to day management of your client account and would never work in the real world if it’s correct, for most independent agents.
    We have a situation were the government wants to regulate agents(which is fine ), however because of their own rules and FCA status the agent cannot obtain regulated status in their own right. Clearly these rules don’t make sense and at odds with each other.
    I would suggest all agents check the official status of their client account accounts, as you may have  serious issues down the line. Even if your agency is part of trade body its still worth checking. As this may also effect your PI insurance TPO status.
    This is another example of Government not understanding  our industry, yes they seek advice from industry trade groups (Arla etc) however do these trade groups have their own agenda, and who represents the smaller independent agent who wants to trade honestly and professionally, and needs workable balanced regulations to do the job day to day.
    Hopefully commonsense will prevail and they allow more time for agents to comply and the Government can remove the conflict in its own regulations, any MPs or trade ministers read this !!!




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