Real estate agents would not be able to accept large cash deposits under proposed changes to be considered by the Victorian government.

State parliament will also consider whether to tighten the eligibility criteria for convicted criminals applying to be licensed agents.

The proposals are included in a Consumer Affairs Victoria options paper examining the Estate Agents Act. The paper is part of a broader review into the property industry announced by the Andrews government in 2015.

In a bid to stamp out embezzlement and the swindling of funds, agents could be prohibited from taking anything above a $10,000 cash deposit for property sales.

According to the paper, cash deposits are over-represented in cases where funds are misappropriated.

There have been two major recent misappropriations in Victoria involving large cash deposits, it was stated, but further details were not provided.

Under the proposed changes, buyers would have to convert cash into a bank cheque or transfer the deposit into an estate agent’s trust account (a holding account for deposits, bonds and rent).

In its submission, the Real Estate Institute of Victoria said the changes were unnecessary because deposits of more than $10,000 were already captured in threshold transaction reports.

The options paper also stated there was concern the eligibility criteria to become a licensed agent was not robust enough.

It comes as The Age revealed the Victorian Business Licensing Authority (an arm of Consumer Affairs Victoria) recently granted a licence to a 60-year-old man with an extensive criminal history and connections to a outlaw motorcycle gang.

An ineligible applicant can apply to the authority for special permission to be granted a licence. The paper highlighted concerns this should instead be reviewed by a court or the Victorian Civil and Administrative Tribunal.

Under the proposed amendments, a person convicted of sexual offences, including possessing child pornography, and sentenced to more than three months’ jail would be disqualified from obtaining a licence. This would also apply to those guilty of unlicensed trading offences and people who have breached the Commonwealth Corporations Act.

The reforms paper also floated removing the ban on agents receiving a commission in cases where they, or a representative or relative, have a beneficial interest.

“There was a view that only in circumstances where a relative of an estate agent is the highest bidder at a publicly advertised auction, and the seller is aware of the relationship between the bidder and the estate agent, could a case be made for the agent being entitled to a commission,” the paper stated.

The paper said stakeholders claim the current ban reduces the earnings of real estate agencies in towns with small populations.

But advocacy group Consumer Action Law Centre strongly opposed lifting the ban, arguing it could create a conflict of interest.

“An agent that receives a commission generally has an incentive to achieve a price that benefits the vendor, as their interests are aligned,” its submission stated.

“Where that agent proposes to purchase the property, or where the property is sold to an agent’s employee or relative, however, the vendor’s vulnerability is increased substantially.”

“The risk is that an agent will arrange a sale at a price significantly below market value.”

The amendments to the Estate Agents Act will be considered by parliament next year.