Barbon Insurance Group, owner of HomeLet, today formally launches what it calls a "revolutionary" rent payment system aimed at locking tenants into direct debit payments, thus reducing administrative workload for letting agents.
A system known as PAID & CO provides agents and tenants with a cloud-based platform that seeks to shift renters away from standing order rental payments and instead move towards BACS-based direct debit transactions.
“Anecdotally, we believe that after the tenant pays the rent for the first month or so in the form of a deposit, almost 50 per cent of tenants then fail to set up a correct standing order for month two and thereafter,” PAID & CO chief executive Tim Rooney has told Letting Agent Today.
Additionally, a survey of 4,000 landlords by HomeLet has revealed that 52 per cent of them had at some point encountered a problem tenant and, of that group, 68 per cent had suffered late or missed payments.
Now this new system allows an agent to set in motion a direct debit while the tenant is still in the office collecting keys, and by using a PAID & CO app the tenant can approve the direct debit there and then. Although direct debits can be cancelled by tenants part way through a month, they are easier to reinstate than old-school standing orders.
“We send a white-labelled text in the agency’s name three days ahead of the payment being taken from the tenant’s account each month, then a thank you text afterwards. If a payment doesn’t come through we also text that we’ll try again in three days. Through greater transparency this fosters a positive, collaborative approach between letting agents and tenants” explains Rooney.
The PAID & CO platform includes a real-time dashboard monitoring payments, which the firm says makes reconciliation easier for agents, and flags up an earlier warning of a non-payment than possible under standing orders: agents are alerted automatically if a direct debit is cancelled by the tenant.
Rooney says there is also a clear incentive for tenants to use direct debits as their regular rent payments are more likely to be seen as an indicator to improve their credit ratings.
At the moment some - but not all - credit rating companies take prompt and regular rental payments into account when assessing individuals’ rating scores, making it easier for them to have credit cards and in some cases mortgages.
“Rental payments are for most people a significant financial commitment and until now it hasn’t been possible to use this information as a positive contributor to the first-time buyer’s credit rating. Through our new service, we want to make life better for ‘Generation Rent’ by supporting them to make the first step onto the property ladder” says Rooney.