No way in hell. Application fees are there so the landlord can make money. Do you disagree? Consider this: The mortgage on one of my rental houses is $480 per month. I'm charging the tenants $1100 per month to live there. Should I refund them the additional $620 every month because "It's not honest?!"
No, don't return them. What do large management companies do? They charge an application fee for all parties and don't refund to anybody. Business isn't "nice".