BLOG: Probe will rule that deposit alternatives are pro-consumer choice

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The Competition and Markets Authority (CMA) is to probe five different activities involving landlords and letting agents, and their responsibilities to private tenants, with deposit alternative products as an area of focus (says Ben Grech at Reposit). 

As one of only two FCA-regulated providers within the UK, Reposit is all too aware of the unfair practices that some operators have unfortunately been allowed to continue. We want to see unfair practices banned but also a recognition that deposit alternative products are efficient and help create a more competitive market that improves consumer outcomes. Equally, we’d like to see the deficiencies of the cash schemes examined.   

Fair amounts

We see that, for the most part, landlords claim fair amounts and tenants pay what they owe. After six years of operation, our data shows 56% of tenancies end without any charges for the tenant to pay, while 14% of tenancies end with tenants owing more than five weeks’ rent (the maximum usually allowed from cash deposits). Five weeks’ rent is not enough protection for landlords if things occasionally go wrong and it’s unnecessary, and even inequitable, to require all tenants to lock up a large cash deposit.

So how can landlords secure the right protection without tenants paying more upfront? This cannot be achieved with cash. However, our product solves the tenant affordability issue while ensuring landlords are fairly and properly protected with up to eight weeks’ rent – 60% more cover than cash schemes. At the end of tenancy, any unfair charges can be disputed, while formal disputes are independently adjudicated and settled within 14 days. 

Locked away

Cash schemes are purportedly ‘free’ and protect tenants from unfair charges, while creating a more affordable and equitable rental market. Yet we believe there are two issues: they’re not equitable and are not free. With the Bank of England base rate at 5.25%, over £200 million per year is generated in interest on the £4.5 billion locked away in cash deposits – money which could be released into the economy. 

The CMA’s mission statement is to ‘Make markets work well in the interests of consumers, businesses and the economy’ and we’re therefore confident it will determine deposit alternatives are pro-consumer choice and promote a healthy market. 

• Ben Grech is CEO at Reposit.

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