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Bank client account changes: Agents urged to have a Plan B

A leading industry figure is calling on agents to have a Plan B ready if their bank closes undesignated client accounts. 

This warning comes after Lloyds Bank recently contacted numerous agents, asking them to open separate client accounts for all of their individual landlords - thought to be part of banks’ responses to existing anti-money laundering regulations which is set to tighten further next year.

Lloyds has been contacting various letting agencies, notifying them that undesignated client accounts will be closed with 60 days’ notice. The bank has offered its letting agency clients two options – to close undesignated client accounts and replace them with multiple designated client accounts, or to close their undesignated account and make 'alternative banking arrangements'.


The shift away from undesignated accounts also acts as an extension of the legal requirement for agents to operate separate client money and business accounts, which has been in force since April this year.

However, it causes much disruption to letting agents affected by the move, as Letting Agent Today reported earlier this month.

Now Neil Cobbold, chief operating officer of automated lettings payment service PayProp UK, says it’s time for agents to prepare for this to spread across other banks.

"All letting agencies need to be thinking about the way they will handle their client payments from now on. Those that bank with Lloyds must consider whether they want to open individual client accounts for each of their landlords or consider alternative options. Those who use other banks may have to prepare for similar action” he suggests.

Earlier this year, alongside the need for agents to operate separate client money and business accounts, it also became a requirement to join a Client Money Protection scheme.

The rules require agencies to hold money in a client money account with a bank or building society authorised by the Financial Conduct Authority, and to comply with written procedures for handling client money as well as keeping records and accounts that show all appropriate dealings.

"Agents may have thought that the introduction of mandatory CMP and the requirement for separate business and client bank accounts would be enough to ensure transparency and satisfy the banks" says Cobbold.

But he says that in light of Lloyds' actions, many agents will be wondering whether they should now consider opening client accounts for each of their landlords. They may also be worrying about the prospect of additional banking fees and administration work.

"If the thought of opening and managing hundreds of separate client bank accounts is concerning agents, there is a range of things they can do to put their mind at ease. They could switch banks or explore PropTech options which could help them to manage their payments using automation” explains Cobbold.

"The news from Lloyds should act as a warning for agencies, encouraging them to spring into action and get a plan in place, as this is an issue which is unlikely to go away and could escalate further in the coming months" he concludes.

  • David Thomas

    So what is ARLA doing in response to this?

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    I bank with Lloyds and have no such problems as I have complied with the latest requirements around CMP, AML etc and have a letter from them confirming so. During a meeting with Lloyds yesterday they confirm that this only affects those agents that don't comply and to be honest they need to comply or get out of the industry.

    Proper Estate Agent

    That's rubbish; we comply and I was even a Chartered Accountant and still we have been told to close the account. They are doing it area by area and most of their managers / directors don't even know yet. On top of that I have raised the issue that their designated account working method does not comply with AML from a legal perspective and I'm awaiting an official response while they look into it.

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    Is the software that agents use to manage payments to landlords set up for this? We use one called CARL

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    I have had this happen to me. Lloyds wanted written declaration every time time a payment was paid into my bank. Therefore meaning I would have to visit every person every
    month and get them to sign saying where the money had come from for their rent every month. It caused me to anger landlords and disrupted my business badly. I ended up with some compensation from them however reputations hard fought but easily lost. I was a client of Lloyds for 30yrs.

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    Should also mention that client accounts need to be officially ring-fenced so separating the funds from the assets of the company so in the event the company goes bust funds in the client account are protected. Lloyds will help set this up and confirm in writing when its done. They will want to see AML and CMP are set up correctly as a part of the process. ... a pain but this will help weed out agents who are breaking the rules.

  • Proper Estate Agent

    There is a total misunderstanding of what Lloyds are doing. They are closing ALL accounts even with AML and CMP. If your manager says they aren't, it's because his area hasn't been rolled out yet. You may also wish to know that their designated account working method does not meet the AML requirements. So they close the ones that does and open one that doesn't...totally genius.

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    Hi All, I am keen to get an understanding as to how other agents have handled this? I have been a customer of Lloyds for 16yrs. Was told in Aug 2019 that we needed to either switch banks or convert our clients account system to have 1 per landlord AND tenant (so approximately 1,000 accounts would be needed!!)
    i argued this with them, which got me no-where as it is their policy and its happening, no matter what. I logged a complaint in Feb 2020 - not even had a response!

    As we all know, It would be a nightmare to move banks (not only with disruption to the rent payments being received, but also for the ability to use the online search facility and go back 16 years if we need to to track disputed payments, which we would now have to do manually through manual statements) and it would also be an administrative challenge and expensive exercise to have separate bank accounts for all our clients, in order to simply receive a rent payment, forward it to the landlord and monitor whether the relevant payment has come in on time.

    I was left with the option of agreeing to the opening of 1,000 client accounts in Feb 2020 (although I suspect, they will run out of account numbers if they are doing this with all the estate/letting agents that bank with them) and have asked for a cheque book and paying in book for each account - I suspect I will need to build another store room to fit all of these in, in some kind of order!

    Frustratingly, it has been nearly a year and i have heard nothing since, so Goodness knows how we are supposed to plan and prepare for it!?

    When is this actually coming in to force? and What has everyone else decided to do?

    Are there any smaller banks where you can still visit an actual branch in your local town to pay in cash & offer undesignated client accounts to ease the facilitation of receiving rent/paying landlord in one swift notion? Whilst you can use the post office for most banks, you cant pay in to a client account at a post office to my knowledge.


    • S Z
    • 28 November 2022 18:19 PM

    Hi Karen.
    Just had the same happen to us and very confused as the best way to move forward.
    Opening individual client accounts for every tenant/landlord/property is not really an option.

    I am more inclined personally to switch banks and take our business elsewhere.

    Did you end up finding other banks that were more welcoming? Interested in finding out what solution you found as you went through the same almost two years ago now.

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    I believe Lloyds are using AML as an excuse to get rid of small businesses that they don't make much money from.

    I hope someone has an answer to S Z's query.


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