This month saw the government accept a series of revised clauses on Client Money Protection (CMP) in the Housing and Planning Bill.
The government has now agreed to carry out a full review of the existing transparency legislation and CMP in May 2016.
While there is currently no legal requirement to have CMP, which insures client funds and protects them from unlawful use or fraud, this development is widely regarded as a huge step in the right direction as it gives the government new powers to introduce mandatory CMP in the future.
This news is of huge significance for consumers and agents alike. 2016 might just be the year that CMP finally becomes mandatory. That said, it’s important that members take note of the existing legislation that already makes it a legal requirement for agents to disclose whether or not they have CMP cover.
CMP – are you in breach of the current law?
Did you know? The Consumer Rights Bill made it a legal requirement for every lettings agent in England and Wales to publicise whether or not they are a member of a client money protection scheme. 1
DCLG published a guidance document in 2015 that clearly stated ‘Letting agents who are not members of a client money protection scheme must make this clear, silence on this subject is a breach of the legislation.’
This is a game-changer for the industry and the DCLG guidance goes on to say ‘this information should be prominently displayed in every office and on the website.’
The legal requirement for letting agents to display whether they have CMP cover is enforced by trading standards officers, which can fine the agent a civil penalty of up to &5,000 (payable to the council) for each office where the information is not published. There will also be a fine of up to &5,000 if the information is not published on an agent’s website.
How can I find out more about CMP cover?
CMP cover is available through a number of providers - agents can access cover through their trade association or Lonsdale, which was one of the first insurance brokers to offer CMP cover to agents that do not belong to a trade body.
TPO has an exclusive agreement with Lonsdale, which offers TPO members comprehensive Professional Indemnity Insurance and Client Money Protection. Further information on the PI + CMP scheme can be found by clicking here.
• Check your office and website: are you displaying your CMP cover?
• Disclose your CMP cover: the more you talk about CMP, the more informed landlords and tenants will become so they can scrutinise rival agents that have yet to sign up and are failing to protect client funds.
• Brief colleagues: If a consumer asks, does everyone know if your business has CMP cover? Please make sure your staff are aware that CMP goes beyond deposit protection – it offers additional safeguards and gives landlords with the peace of mind that the rent collected by their agent is protected from fraud and unlawful use. These press articles really highlight the nightmare scenario tenants and landlords can face if their agent does not have CMP cover in place:
o Letting agents jailed for total of seven years after &400,000 thefts
o Letting agency's mystery closure - man arrested
o Rogue letting agent jailed after taking rents, deposits and wages
o Letting agent may be jailed after clients paid rent into personal account
o Letting agent jailed after leaving landlords out of pocket
1 Source: ‘Improving the Private Rented Sector and Tackling Bad Practice: A Guide for Local Authorities’ (DCLG, March 2015)