Tenants can take rent payment back??

Question

Hey,

Has anyone had experience of rental payment dispute via cozy.com?  I heard that tenants can dispute any rent . Sounds like they could get any money back regardless of the situation which sounds horrible.

Can tenants dispute all the rent back after lease ends? If so, there would be no lease protection any more.

I messaged cozy support, and they replied below which seems very bad to landlords.

Reply from customer service:

unfortunately, when it comes to payments being disputed, Cozy does not have the ability to prevent it from happening.

The reason for this is that it's entirely up to the tenant's bank whether to allow a dispute. If they do allow it, the bank then takes the money back from Cozy, and we're obligated to let them. In turn, we then have to take the funds back from you.

From there, however, you would have the option to challenge the dispute in most cases. In the event the dispute was still decided in favor of the tenant, you would need to then pursue the funds outside of Cozy.

PJ M. · Answer

This is a chance you take with any payment processor or if you accept credit cards for rent payments.

I accept ACH from the tenant's bank to my account, checks, money orders, and cash.  I don't do any of the 3rd party processors.  It's too much at liberty for abuse for not that much more convenience.

cozy's answer pretty much cums it up.  The bank is there for their customer.  Their customer is the one who initiated the payment.  The bank will fight for them.  Period.

Cozy, and all 3rd party processors, are subject to the whims of the bank, who is there fighting for their customer.  Who wants to take money back from you.

Who's looking out for you in the case of these 3rd party processors (cozy, paypal, venmo)?  no one except you.

As with all things, it will probably go smoothly 99% of the time.  That 1% though, when it happens, you'll lose 2 months rent.  Not worth the chance in my book when it's just a few more hoops for the tenant to set up ACH from their bank to me.  That way when the file a dispute they'll have to provide some type of reasoning why the ACH should be pulled back, which usually involved fraud, which the bank will see is not the case when the tenant logged in and initiated an ACH that they have been paying for the last 11 months.  That, and the fact that the funds are moved out of my account 24 hours after the payment is received.

Dave Chow · Answer

I have never had this situation. But I heard someone had such experience from a bigger pocket post. So it kinda of reminds me of potential issues. Mostly it would not happen if screen properly. Thanks for all your inputs.

Andrew B. · Answer

Because of the way the payments are processed, legally, the bank is allowed to dispute the electronic payment going back a certain period of time. I think its limited to 60 days though. a good point to keep in mind is that the lease still ensures the tenant is obligated to pay. you would have to pursue through the legal system, but if you properly screen you shouldn't have to worry about the issue.

here's the way I see it. if a tenant decided to stop paying the last two months, its likely the evction could be dragged out that long anyway. at least if they dispute the final two months payment, the property is clean and not damaged.

Cassi Justiz · Answer

Have you actually had this happen or are you just worried about the possibility? I wouldn't imagine it would be likely that a credit card would ever rule in favor of a tenant to dispute months worth of rent payments. If they did, you could provide a copy of a signed lease and prove the payments were legitimate.

Generally the person initiating the dispute will have to have some proof of fraud or reason why the charge was not legitimate. If they were to dispute the charge and/or end up canceling the payment, you can serve them a notice of non-payment and start your eviction *per state laws of course*.

When I recently had to dispute a charge on my credit card, I had to provide all of my documentation to/from the company showing they were not responding to my requests for a refund. THEN the credit card company also had to reach out to the company to give them the opportunity to provide any documentation supporting the charge. It definitely wasn't a "I don't want to be charged, give me my money back" kind of situation.