Automated payment systems can help to reduce letting agency fraud, it has been claimed.
PropTech firm PayProp says that automating rental payment administration can help reduce the incidence of rogue letting agencies fraudulently withholding money from landlords and tenants by increasing transparency and providing an automatic, unalterable digital record.
PayProp’s claim follows the recent confirmation that mandatory membership of a Client Money Protection (CMP) scheme, which will protect landlord and tenant money in the event an agency goes out of business or misappropriates the funds, will come into force next April.
“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,” said Neil Cobbold, chief operating officer of PayProp in the UK, a bank-integrated automated payment platform.
“These are significant sums of money for consumers so there should always be documentation and evidence of all payments received by agencies.”
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.
From April 2019, agencies that are not members of an approved CMP scheme could be fined up to £30,000. There will also be fines of up to £5,000 for agencies that do not display the details of their CMP scheme membership on their website and in their office.
Cobbold added: “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.
Cobbold continued: “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.”
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”, according to Cobbold.