"There is clearly a need for greater clarity and education as to where an APP fraud claim is relevant and, crucially, where it isn’t"
- Garrett Foxon - LettsPay
The landscape of rent collection is becoming increasingly complex, with a noticeable rise in the use of Authorised Push Payment (APP) fraud claims by tenants. Whilst the intention of APP fraud protection is to safeguard consumers from scams, the application of these claims within the tenancy lifecycle, particularly regarding rent and holding deposits, warrants closer examination.
At LettsPay, we have experienced a significant increase in the number of APP fraud claims raised by tenants over the last few months. What is particularly striking is the outcome of these challenges: every claim we have challenged has ultimately been successful in our clients' favour. This success rate indicates that in these specific cases, the claims were unfounded.
In a concerning trend, tenants appear to be increasingly favouring the APP fraud claim route over established industry redress scheme adjudication, particularly regarding holding deposit disputes.
A typical holding deposit is intended to demonstrate a tenant's commitment and is subject to clear rules under the Tenant Fees Act. Disputes over the return of a holding deposit should, logically, be handled through one of the redress schemes i.e. The Property Ombudsman Scheme or Property Redress. Alternatively, action could take place through the courts.
The preference for an APP fraud claim suggests tenants may perceive this route as quicker, less adversarial, or perhaps simply a more effective means of recovering funds.
For LettsPay, the process of investigating and challenging claims is resource-intensive but streamlined, as we are payment experts. However, for letting agents that would have to do it on their own, I can imagine it is a daunting task that is an additional administrative burden on a seemingly never-ending list of tasks to do and where every minute is precious.
There is clearly a need for greater clarity and education as to where an APP fraud claim is relevant and, crucially, where it isn’t.
The successful challenge of every recent APP fraud claim we have seen indicates that, at least in our experience, these claims are often misapplied to routine tenancy disputes. The mechanisms of APP fraud protection were not designed to be a surrogate for a tenancy deposit or redress scheme. Their purpose is to protect customers who have been tricked into sending money to a criminal.
The banking industry, regulators, and banks need to provide greater clarity on the appropriate use of the APP fraud mechanism in a tenancy context. Furthermore, there is a clear need for greater tenant education on the established routes for dispute resolution, such as the relevant redress scheme, which is specifically designed to handle issues like the return of a holding deposit.
It is turning out to be another regulation for the right reasons that has generated an unintended consequence that leaves the letting agent with even more admin work.
