I have some experience of this as Mum rented her house and was oblivious (as I was) to the 2007 housing act and the DPS scheme.
The tenants trashed her house, she withheld their deposit as a result.
Due to it not being in a DPS the small claims court ordered her to repay the deposit and then sue the tenants for the damage.
There's a case (someone vs Hashemi) and the case law derived from it which basically says a landlord will only feel the full brunt of the law IF the tenant informs the landlord during the tenancy that they must place the deposit in a DPS. Otherwise, the landlord must simply do as my Mum had to do which is repay the deposit. No fines, no compensation etc. Which was good for her. Especially as the tenants (one of whom is the daughter of a Council Housing Officer) didn't look after the property with the express intent invoking the act to reclaim their deposit and any bonus!