Being charged a fee to pay your rent sounds like it should be illegal, and in some cases it is. That doesn't stop some rental agents from pulling the nifty stunt of outsourcing rent processing and having tenants pick up the tab though.

So are rental agents who use third-party payment schemes engaging in the prohibited practice of "third line forcing"?

Outsourcing the cost

Lynda K from Adelaide, a single mum with four kids and a tight household budget, tells us her rental agent requires her to use Rental Rewards, a third-party payment scheme that charges her a 1.75% fee per transaction. That's a $6.13 weekly payment on top of her $350 rent, a cost Lynda must wear. She pays by credit card because she's worried she'll be hit with a $15 dishonour charge by Rental Rewards and face a $10 fee from her bank should she use the direct debit option (a comparatively modest $1.50 per week) and get caught with not enough cash in her account on a given week.

Lynda says she doesn't want to confront the rental agent about having to pay an extra $319 a year to save him the trouble of dealing with rent collection, out of fear she won't have her lease renewed, as finding the rental in the first place was an ordeal. In paying by credit card, she earns Qantas and Myer rewards points, but Lynda has no interest in either. Her take on the situation leaves no doubt: 'It shouldn't cost you anything to pay your rent.'

A Rental Rewards customer service agent gave us a somewhat different account of pricing, saying the fee is 1.1% plus $2 for transactions of less than $5000 using Visa or MasterCard, and 1.1% plus $10 using Amex or Diners Club. Though she did acknowledged the 1.75% may be from an earlier pricing system. Company spokesperson Kevin Butler requested we submit our questions via email but didn't respond before publication.

Other rent payment schemes include Advantage, Rentpay and Rent Mate, while Corum Real Estate Services operates a payment scheme using TransCard and Century 21 Easypay Card.

Reach toward regulation

The Tenants Union of Victoria suggests payment scheme providers may be engaging in the prohibited practice of 'third line forcing' when tenants are required to use a scheme and no alternative is offered. But the application of this longstanding aspect of consumer law to the third-party rent payment industry is a work in progress. The ACCC says it's up to individual states to decide whether violations are taking place.

The Deputy Commissioner for consumer affairs at South Australia's Consumer and Business Services told us it's only illegal in SA to make tenants change their method of payment mid-lease.

'There is currently nothing in the [SA] legislation that prevents agents from offering third-party rent payment schemes as the only method that will be accepted for paying rent. However, this matter is being looked at as part of a review of the Residential Tenancies Act.'

Senior policy officer Chris Martin of the Tenants' Union of New South Wales says the state updated its Residential Tenancies Act in 2010 to address this very issue.

The law now prevents agents from pulling a switch on payment methods mid-lease and requires them to offer a 'reasonably available' fee-free alternative at all times. According to Martin, under the previous version of the Act 'there wasn't anything you could do about it'. If the alternative method is not reasonably available, NSW renters should lodge a complaint with NSW Fair Trading and contact the Tenants' Union (02 8117 3700). Martin says, 'We'd be interested in hearing from anyone having trouble with the provisions of the new legislation.'

Martin's colleague Ned Cutcher adds that the right for third-party schemes to charge penalty fees is also open to legal debate. 'The Consumer, Trader and Tenancy Tribunal would probably take that up and challenge it as well.'

The legal question

The availability and feasibility of fee-free methods may turn out to be a decisive factor in any legal challenge to these schemes. Another SA renter, Martin W, told us his rental agent offered a fee-free alternative, but he was still stuck paying through Rental Rewards. 'The alternatives were to pay by cheque or cash at the real estate office or mail a cheque to the agent,' he says. 'These options were inconvenient because I work full-time and, not having a cheque book, I would have had to pay the bank for cheques, trading one fee for another.'

Toby Archer of the Tenants Union of Victoria says the agency received 160 complaints about rent payment schemes in 2010-11, though the state currently doesn't require rental agents to provide convenient, fee-free options to third-party schemes. 'Rental agents are offering payment methods that aren't practically feasible for clients,' Archer admits, adding that Victoria is watching developments in NSW closely. Martin says the recent reforms in NSW 'have done a reasonable job of fixing the problem' but believes the schemes remain a raw deal for renters.

'Agents are simultaneously reducing their processing costs and making someone else pay for it. It's just amazing, really. It's an offensive principle that you should pay to have your rent collected.'

Meagre rewards

Rental Rewards lists 19 real estate companies as participants, including offices from those with big market share such as LJ Hooker and Ray White, as well as numerous individual agencies.

The company says renters benefit by earning Qantas and Myer rewards points on their credit cards, though both consumers and the tenant unions of NSW and Victoria tell us that paying by credit card slaps renters with the highest weekly fees – as much as $26 per month on a monthly rent of $1500. And redemption of the points depends on the terms and conditions of your credit card, irrespective of the Rental Rewards program.

In any case, our previous research into card reward programs indicates they're rarely good value for money – and your personal details will likely be collected and used by the provider.