Increased regulation and automation to combat fraud
PayProp's claim follows the recent confirmation that mandatory membership of a Client Money Protection (CMP) scheme will come into force next April and after a number of letting agencies have been expelled by the Property Ombudsman for payment fraud this year.
CMP schemes protect landlord and tenant money in the event an agency goes out of business or misappropriates the funds.
From April 2019, agencies that aren’t members of an approved scheme could be fined up to £30,000. There will also be fines of up to £5,000 for agencies that don't display the details of their CMP scheme membership on their website and in their office.
Landlords and tenants still losing significant sums of money
Earlier this year, the Property Ombudsman Scheme announced that it had expelled three agencies for various payment issues. One was expelled for withholding over £12,000 of rent, another for a range of failings including neglecting to protect a deposit.
The third agency had its expulsion extended after it made no record of a £1,375 deposit and advance rent payment, which it subsequently withheld.
Neil Cobbold, chief operating officer of PayProp in the UK, had this to say: "Cases of rental payment fraud are relatively rare, but there are still too many examples of landlords and tenants being left out of pocket by unscrupulous letting agencies.
These are significant sums of money for consumers so there should always be documentation and evidence of all payments received by agencies.
The introduction of mandatory CMP membership for agencies will be a crucial step towards reducing the chances of rental payment fraud occurring. This much-needed regulation, combined with an increase in adoption of automated rental payment systems, can improve transparency across the rental sector."
It is thought that around 80% of agencies are already members of an approved CMP scheme, meaning approximately 3,200 firms will be required to join one before April 2019.
Neil continues: “Mandatory CMP will ensure that consumers’ funds are protected, but it’s also important that agencies have the systems in place to manage payments efficiently and accurately.
An automated, bank-integrated payment system allows agents and landlords to see the live status of a portfolio, providing digital reconciliation which can be vastly more accurate.”
He says they also benefit letting agencies by providing streamlined processes, increased scalability and reduced administration.
A reduction in fraud can boost the whole industry
Neil concludes: “The prospect of reduced rental payment fraud through the introduction of mandatory CMP scheme membership and increased digitisation of payments can boost the whole industry.
It can contribute towards improving the public perception of letting agencies with fewer negative headlines in the mainstream press. Tenants and landlords, meanwhile, can continue to operate safe in the knowledge that their money is protected.”
Increased regulation of the rental sector combined with effective utilisation of PropTech can help letting agencies to thrive and become more profitable in a market that continues to grow rapidly."
