Tenants beware of rental rewards schemes

Tenants are doing it tough with home rental prices going through the roof because of low numbers of rental housing stocks and the consequent high rents being asked to secure a lease.

Income stress through wage stagnation is also hitting the hip pocket of renters. Or worse, renters who lost their jobs through Covid-19 pandemic lockdowns, combined with the cessation of the Federal Government's JobKeeper program have been forced into a very vulnerable situation.

Meanwhile, during these tough times for renters, some of Australia's leading real estate agencies have thrown out their moral and ethical compasses and signed up to fast-growing ‘rental rewards' schemes.

The scheme involves real estate agents outsourcing their rent-collecting to third party companies such as Rental Rewards, which charges renters a fee to pay their rent and rewards them with Qantas frequent flyer points.

The barefoot investor

Finance expert, journalist and author, Scott Pape – barefoot investor, investigated Rental Rewards whose website describes the service as "revolutionary", "convenient" and rewarding".

Pape then looked at the popular ProductReview website where customers described Rental Rewards as "Absolutely terrible"; "So bad I can't believe it exists"; and "Avoid! Avoid! Avoid!".

One of Pape's readers described how she used to pay her rent by direct transfer for free. Her property manager informed her that she was being 'migrated over' to a third party platform, Rental Rewards, that charges a fee. The cheapest option was $78 a year but some of the credit card options worked out to be $312 a year on top of rent.

Pape maintains that the rental code of most States in Australia requires real estate agents to provide at least one fee-free method of paying rent. Rental Rewards subverts the system by accepting (fee-free) cheques in an era when virtually no-one uses cheque books anymore or else pay a hefty fee if/when using a bank cheque.

Pape reveals that Rental Rewards encourages often vulnerable low-income earners to pay their rent with a credit card in order to utilise their "interest-free days". They promise renters they will earn "1000 Qantas Frequent Flyer points every year when you pay by card".

However, there is nothing in the Qantas Rewards Store that can be bought with a year's worth of Rental Rewards points. Pape mused that:

I wanted to buy something practical like, say, hair removal. Alas, it wasn't even a close shave: The Philips shaver cost 69,000 points, taking 69 years of paying rent to earn enough with Rental Rewards...There was nothing in the Qantas Store for sale for 1000 points.

Scott Pape – barefoot investor, June 2021

The standard fee on the Rental Rewards scheme is a 1.45% 'processing fee'. For a single parent paying $350 rent per week this constitutes an extra $264 a year to pay on top of the rent. It doesn't sound like much but as Pape points out, it is the equivalent "of a years' worth of second-hand school uniforms and shoes for the kids." Pape calculated that one Qantas point is worth 0.004 cents and therefore 1000 reward points that cost the renter $264 a year in fees are worth $4.

If the tenant complains they risk upsetting their rental manager and not having their lease renewed. Victorian tenancy laws were changed in March 2021, to protect tenants from 'rental rewards' and other third party rental schemes.

Leo Patterson-Ross, the chief executive officer of the Tenants Union of New South Wales, says, "It's a big issue and one that's been going on for a long time."

Queensland rental payment schemes

In Queensland, third party rental schemes known as 'Rent Cards' are still permitted to operate:

Rent cards are increasing in popularity, however a tenant does not have to agree to pay rent this way.
Rent cards allow rent payments to be processed by a third party (e.g. REConnect oneCard, DEFT Card, LJ Hooker Priority Card).
The tenant is usually charged a monthly service fee and may be liable for a range of other fees and charges (e.g. dishonour fee).
If the property manager/owner would like the tenant to use a rent card they must offer the tenant 2 other ways to pay the rent (e.g. by cheque, EFTPOS or direct debit).
The RTA does not get involved in disputes between the rent card company and a tenant.
The property manager/owner must ensure the tenant is fully aware of all charges, fees and rules associated with rent cards. The tenant should make sure they understand this detail before signing the tenancy agreement or rent card contract.

(Residential Tenancies Authority, Queensland Government)

Misleading or deceptive conduct

Rental Rewards has displayed the logo of several well-known national property groups on their website, claiming them as clients. At least two major real estate companies have demanded their logo be removed because they are not clients and Rental Rewards are using the logos without consent.

Company director Marie Iatsenta denied that Rental Rewards were pushing tenants onto credit card payments, saying it was up to real estate agents to determine what method was used.

The independent product report, CHOICE, is looking into the issue of tenants being required to pay rent through Rental Rewards or other rent payment schemes. CHOICE highlighted the case of a woman who was charged a 1.75% fee per transaction by Rental Rewards, a $6.13 weekly payment on top of her $350 rent. And she faced a $15 Rental Rewards penalty if she didn't pay on time.

The consumer watchdog, ACCC, maintains that if a real estate agency or third party payment processor represents to consumers that they will be charged a payment processing fee, when part of this fee represents a commission paid to the third party processor, this may be misleading or deceptive conduct and in breach of the Australian consumer law.

Pape appeals to property investors (or if you know someone who is):

ring up your real estate agent and ask whether they are signed up to Rental Rewards . If they are, ditch them. Take your business to somebody who respects the person who's paying off your asset.

Scott Pape – barefoot investor, June 2021

Researched, Composed and Edited by Dr Steve Gration, July 2021.

References & Sources

Scott Pape, barefoot investor. Be cautious of rental rewards. Herald-Sun, Finance p.56, 13 June 2021.

https://www.barefootinvestor.com/articles/rental-rewards

https://www.realestate.com.au/news/rental-rewards-how-victorian-tenants-are-protected-from-feegrabbing-payment-schemes/

https://www.theguardian.com/australia-news/2021/jun/17/it-starts-to-add-up-renters-charged-fees-to-pay-rent-as-real-estate-agents-outsource-collection

https://choice.community/t/rental-rewards-and-other-3rd-party-rent-payment-schemes/24790

https://www.rta.qld.gov.au/renting/starting-a-tenancy/rent-payments