In a recent article published by Landlord Today, it has been confirmed that the custodial deposit scheme, The Deposit Protection Service (DPS) has been bailed out over the last few years and there has been a payment of £12.7M to ‘renegotiate’ guarantees that were put in place at its original inception.
The basis of the original funding requirement was that the interest accrued on the money held would pay for the administration of the scheme. As interest rates have dropped, and stayed at this rate for so long, the initial funding projections, presumably, were totally wrong, and hence the alleged bailout
This comes after the Dispute Service Ltd (TDSL) had to radically overhaul their charging structure in 2009 and again in 2010 to cover costs of running the scheme due to the larger than expected number of adjudication cases. It is alleged that each referral to adjudication costs the scheme(s) approximately £300, and as the adjudication is ‘free’ to the affected parties, you can see where the imbalance between income and expenditure can quickly become unbalanced.
It is difficult to see how any of the three schemes can continue on a self-funding basis.
Due to the increasing costs of membership of TDSL in comparison with the level of service and incumbent administration process for dealing with the deposits Belvoir Nottingham took the decision to not renew membership of TDSL, instead electing to transfer all of the deposits into the DPS where there is no membership fee requirement and the administrative burden is reduced.
