The dark side of open banking

It feels wrong and insidious but most rental and mortgage companies ask for three months worth of statements.

The only way to get around it, is to use a credit card and then your individual spends don’t show up.

I know when I was sorted my mortgage, I had to give statements for 3 months from two bank accounts, a personal and joint account.

I guess it’s the new norm.

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A mortgage I totally get. You’re buying your own place.

A landlord can go swivel.

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No. Don’t think it ever has been.

There are legal caps on a deposit, but not on upfront rental amounts. There probably should be.

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Or if in the USA and flux was a thing a health insurer could even see how much alcohol or cigarettes you buy.

Pretty dystopian stuff.

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Personally I would have played along but I would have taken that contract to the states housing authority and to a lawyer to look over. There is no way this is legal.

I was just cleared to close on a house and they didn’t request access to my bank account. They just requested my bank statements.

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Speaking as a landlord I won’t entertain tenants who can’t show me 3 months bank statements. It shows me how they manage their money. People who do everything in cash don’t get a look in as experience has taught me that they haven’t a clue where their money goes. I could write a book on the number and variety of excuses that tenants have for not paying their rent. And those who don’t pay create a knock-on domino effect on my own finances, mortgage payments etc.

However, the way credit agencies are now doing everything online and using Open Banking does seem to expose far more information than the landlord really needs. My advice would be to have several bank accounts with one that specifically shows your salary coming in and all your direct debits going out plus a few card transactions at Asda or Aldi and perhaps shows you filling up with petrol and paying your current landlord. Anything you don’t want them to see can be done in another account.

I don’t use a credit agency and I am old school. I check physical bank statements / PDFs and wage slips and place a lot of faith in reading people at a face to face interview. Machines are useless at that sort of thing. Good luck with finding your ideal property!

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I’m curious then, as a landlord, if say I’ve been renting for 8 years at £750 a month and had the same job, why would my previous landlord confirming this plus my payslips not suffice, particularly if my new rent is the same amount?

I get that there are a lot of people who would bend the truth, but I still fail to see why the number of Prets I get or how often I visit Lidl is any business of my landlord if I can provide over a decade of consistent rent payments and income.

(I’m genuinely curious about rationales here. It’s a really important thing to have a place to live and landlords have a great power over a lot of regular folk)

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What has it got to do with you if they still pay their rent?

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Is it not possible for landlords to just do a credit check?

Technically rent is just like setting up a direct debit with a new firm, so that should score them on affordability, if they frequently miss payments etc without the hassle (or invasion) of trawling through statements.

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Power trip. I have a second place to rent out so I must be better than these plebs who spend their money on avocado toast. Said to their mates while drinking their second pint of the morning in ‘Spoons. Yes, I despise landlords

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You’re apparently coffee mad and an investor so we would probably get on so the face to face interview and a wad of payslips might get you over the line. As an investor you will understand risk management. Add to that the changes in tenancy law that makes it virtually impossible to evict a tenant once you let them in, then you have to be 110% certain that someone is going to pay you in full and on time every month. Only a bank statement is absolute proof of that.

I have known previous landlords give glowing references to tenants just to get rid of them and 30 years of being a landlord where I lost thousands in the early days has taught me a lot. I don’t care how many Prets you have, how much bitcoin you’ve bought or where you shop. A bank statement contains an overall illustration of someone’s life. It shows the salary coming in and the rent going out plus an overall picture showing that you do shop regularly and you don’t spend too much at the casino or similar. In other words you spend you salary on your living costs like an average Joe.

My most recent new tenant had a lot of debits to Klarna. So do I. The one before that had a CCJ and the credit agency advised I decline them. My personal interview told me I was dealing with a good honest person. I took her on as a tenant. I have had CCJs. We are all human, we make mistakes and get into difficulties. No problem. But a bank statement showing salary coming in and the whole lot drawn out in cash - no way! I need a person who eats properly, pays the rent and has no bad vices, and can prove it.

If that sounds harsh, know that my CCJs were a result of my inability to pay my bills because tenants had defrauded me. I am giving them the keys to an asset costing £200,000 and I need a return on it to pay my mortgages. I do not need someone who has plans to live there free for 2 years while the legal processes churn away.

If we met, it would probably be over a coffee and we would discuss our investments. We would hardly talk about the property, the rent and the agreements. I have had 100% occupancy for some years now. People like what I offer, they like the service I give and I take an interest in what they do and how they are getting on. After the so-called background checks, that aspect becomes totally unimportant.

A tenant who works in a gin factory and brings home samples might be a great sweetener, but if his credit score is appalling no amount of alchohol will persuade me! If he appears to shop once a week that’s good. If he visits Costa and Starbucks regularly then he is my kind of person, but if he is seen to be paying his rent by standing order on the same day every month, then that is more important than his choice of supermarket or his eating out choices.

Sorry to have gone on a bit, but back where we started, Open Banking links aren’t really necessary if you have printed statements. I have an account with Chase for their 1% cashback on card purchases but Chase don’t have Open Banking.

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Thanks for the explanation - very detailed and exactly what I was looking for :+1:

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Detailed post, thank you!

I’m curious though, someone using Klarna a lot doesn’t bother you, but someone taking out lots of cash does? The former is more likely to cause you a problem down the line if that ramps up, interest charges etc etc?

I’ve seen and heard of lots of these kind of stories and it’s crazy how long and complex the eviction process is. Plus the fact that it costs the landlord even more money to take action and have someone forcibly removed :exploding_head:

All of this sounds like another case of the minority ruining it for the majority again. Combined with us as a country being too soft with our laws and the enforcement of them.

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Your answer was really detailed and made a lot of sense with one tiny exception. How does a potential tennant’s diet affect their desirability to you as a landlord? Even my mortgage company didn’t care about this.

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I think they summarised what was meant by this in the prior paragraph.

They can of course correct me if I’m wrong, but that’s my interpretation and they don’t actually care if you eat salad everyday or a pizza.

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Oops! I supposed I rambled on a bit and something was bound to come out wrong. I don’t care if you eat fat, carbs or just nuts and insects. Just to see that you shop rregularly for some sort of nourishment. If you food shop regularly then you are a normal person doing normal things. To be honest I wouldn’t know if your weekly Asda shop wasn’t for beer and whisky so it’s not foolproof. You just get to know what the average person’s spending looks like. It really doesn’t go under the microscope. I only take a cursory glance. Of course, if you were in Waitrose every week I’d be looking at your payslips to make sure you earned accordingly!

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Gotcha, thank you for clarifying :blush: I had a brief moment of worry that the world was about to start judging my tunnocks teacake addiction.

In the digital, remote and bigger management company world the answer to ‘seeing physical statements’ is open banking and and algorithms analysing :man_shrugging:

If we knew we could trust the company giving the affordability score for privacy , so some independent company providing the landlord sanitised data I wouldn’t be too against it, sending your full statements to a company who store it on their server 2008 file share is worse than a trusted open banking solution I think.

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