Honestly, your answer was spot on but it doesn't really matter what makes sense and seems clear because you're dealing with a human being that doesn't know how to admit they're wrong and will take that fight to their grave. What you've interpreted is correct (unless Sirius would like to give her interpretation to show us otherwise and would like to reference the court cases where this was proven to be ruled illegal, but I wouldn't hold your breath as you'll likely get "it's all there for you to read and if you don't want to be informed that's up to you " or something along those lines).
You still don't understand. Lets lay this out in steps then...
The description of what a deposit is, is listed in the Housing law I quoted above. What don't you understand about that?
Tenants' have taken landlord to court because 5 months of the 6 months advance rent was not put in a deposit scheme.
Judges ruled that tenant should be paid 3 times 5 months advance rent by landland as a fine, because that was a deposit and should have been held in deposit scheme as required by the Housing Law.
Then...
Tenant Fees act says not more that 5 weeks deposit can be taken or up to 30k fine and can be a criminal conviction too.
...
I shouldn't have to referece anything as basic as what a deposit is to a landlord; which you said you are. Getting nasty to try to make me reference things for you, will not happen.
The laws change to financially hit the landlords who haven't bothered to learn the laws. The having to pay the fine to the tenant with the Deposit schemes amendment, was a masterstroke.